Press Releases

Statement on the January 2024 inflation report

February 6th, 2024

Rep. Joey Sarte Salceda
6 February 2024

2024 starts on the right note. The January 2024 inflation figures demonstrate a few key insights for policymaking.

First, the continued divergence of the rice and corn sectors sharpens even further, as far as domestic price competitiveness is concerned.

Corn prices actually became cheaper year-on-year, by 4.3 percent, which also dragged down meat prices by 0.7 percent. Domestic corn has historically shown its potential – which is why the DA’s ongoing and significant investments in corn processing systems is a significant step in the right direction.

The stabilization of onion prices along with the vegetable harvest season has also caused overall vegetable prices to go down by 20.8 percent.

In other words, without the global rice price situation, which was a completely external shock, overall inflation would have been extremely low for January.

Second, alcohol and tobacco prices are rising faster than the indexation of excise taxes. Tobacco prices are particularly rising at 9.8 percent year-on-year. That price movement will accelerate the shift to electronic cigarettes. Tobacco revenues have already declined by as much as P76 billion versus baseline since 2021, in large part due to this shift. The PSA may consider adding electronic cigarettes in the mix of goods to accurately reflect this change in consumer preferences, as well as for policymaking purposes.

Third, the persistent rise of prices in sugar has also finally stopped, at least for now. This has implications in food manufacturing, whose price movements might be reflected in the February 2024 figures for ready-made food and non-alcoholic beverages.

Generally, I expect food prices to improve in 2024, although some upside risks remain.

The rice price situation could begin stabilizing after May 2024, when the Indian elections take place. India’s decision to ban non-basmati rice imports is essentially a political one, rooted in the desire to lower Indian market prices in time for the elections. Prices in India are particularly exacerbated by the substitution with wheat, which is an equally important part of the Indian diet. Wheat prices will not normalize until the Russia-Ukraine conflict is resolved.

Another upside risk for 2024 is logistics costs which could rise due to ongoing attacks on international shipping by Houthi rebels in the Red Sea.

The way forward is to significantly increase domestic production of rice. It is doable. We have irrigated only about a third of our arable land. We have only planted some 0.6 million hectares with hybrid seeds, out of a target 1.9 million, with a total of 4.8 million hectares for the palay sector. Completing the target hybrid acreage will improve rice self-sufficiency from 77 percent to a healthy 90 percent – making us les susceptible to global rice price shocks.

Cheap corn also demonstrates its importance as an input to other goods. We need to sustain investments in corn, considering its critical value for fisheries and livestock.

2024 food prices will likely be better than 2023, which will have positive effects on economic growth and on real wages. The Department of Agriculture, under Secretary Francisco Tiu-Laurel, will be of supreme importance this year.

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