The Philippines’ overall inflation rate further decelerated to 3.9 percent in December 2023––the lowest rate recorded in 2023.

This brings the year-to-date (YTD) headline inflation rate to 6.0 percent, the same as the Development Budget Coordination Committee (DBCC)’s assumption of 6.0 percent for full year 2023.

“Our whole-of-government approach of maintaining price stability, implementing timely non-monetary policy measures, and addressing supply gaps have paid off. Rest assured that the Marcos, Jr. administration is fully prepared to further mitigate the effects of inflation this year amidst global headwinds,” Finance Secretary Benjamin E. Diokno said.

The major drivers of the downtrend in inflation for December were lower year-on-year (YoY) inflation in housing, water, electricity, gas, and other fuels (from 2.5 percent in November 2023 to 1.5 percent), followed by food and non-alcoholic beverages (from 5.7 percent to 5.4 percent).

Meanwhile, the top three commodity groups that contributed to the December 2023 overall inflation were food and non-alcoholic beverages with 2.1 percentage points (ppt) of the overall 3.9 percent; restaurants and accommodation services (0.6 ppt); and housing, water, electricity, gas and other fuels with 8.3 percent share or (0.3 ppt).

Food inflation slowed down to 5.5 percent in December from 5.8 percent in the previous month and 10.6 percent a year ago. However, it continued to have the biggest inflation contribution for the month at 1.9 ppt or 48.5 percent of the overall inflation rate mainly due to rice (1.7 ppt); fish and other seafood (0.3 ppt); and milk, other dairy products, and eggs (0.2 ppt).

Meanwhile, non-food inflation sustained its deceleration at 2.6 percent in December 2023 from 2.9 percent in the previous month and 2.7 percent a year ago.

Non-food inflation in the last month of the year was mainly contributed by food and beverage serving services (0.54 ppt), housing rentals (0.48 ppt), and personal care (0.19 ppt). These are followed by passenger transport services (0.15 ppt) and water supply and miscellaneous services related to the dwelling (0.14 ppt).

Core inflation, which excludes selected volatile food and energy items, settled at 4.4 percent from 4.7 percent in the previous month, bringing the average core inflation for full year 2023 to 6.6 percent.

Inflation in the National Capital Region (NCR) dropped to 3.5 percent in December from 4.2 percent in November 2023. Likewise, the inflation rate for areas outside NCR decelerated to 4.0 percent for the month from 4.1 percent in November 2023.

Food inflation averaged 8.0 percent for the full year 2023, which is higher than the 6.1 percent recorded in 2022. Top contributors to food inflation in 2023 were rice (0.7 ppt); vegetables, tubers, plantains, cooking bananas, and pulses (0.5 percent); and fish and other seafood (0.4 ppt).

On the other hand, non-food inflation posted an average of 4.5 percent inflation for the year, lower than the 5.7 percent inflation registered in the previous year. Food and beverage serving services (0.7 ppt); actual rentals for housing (0.6 ppt); and passenger transport services (0.4 ppt) were the top contributors to non-food inflation in 2023.

Government measures to mitigate inflation

Under the leadership of President Ferdinand R. Marcos, Jr., the government has committed to take on a more intensified approach in 2024 to mitigate the effects of inflation.

Investments in flood control infrastructure and post-harvest facilities will be prioritized in order to stabilize the supply of key agriculture commodities. Subsidies and financial assistance to farmer beneficiaries are also available for managing rising production costs and to sustain the productivity of the sector.

Other measures include increasing the agriculture sector’s productivity, filling the domestic supply gap through timely and adequate importation based on ex-ante demand and supply analysis, and further strengthening the government’s commitment to address anti-competitive practices.

With the looming El Niño that is expected to continue this month and will likely persist throughout March to May 2024, the Marcos, Jr. administration is prepared with the El Niño Mitigation and Adaptation Plan with the Department of Agriculture (DA) as the implementing agency to help lessen the impact of El Niño on the agriculture and fishery industries.

At the same time, the Bureau of Customs (BOC) will continue to combat anti-competitive practices by implementing intensified border control measures, monitoring unfair trade practices, and filing legal cases.

As inflation in rice continues to accelerate due to persistent higher prices in the international market, the President signed Executive Order (EO) No. 50 which extends the modified rates of key imported commodities, such as rice, until December 2024.

Additionally, a rice importation agreement with India is currently underway, and a possible expansion of the Unilateral Minimum Access Volume (MAV) of select commodities, in consultation with stakeholders.

In mitigating non-food inflation, conservation and supply management measures are being implemented, particularly on energy and water.

To help mitigate oil inflation, the government will issue guidelines for the voluntary increase of ethanol blend for gasoline, which could help decrease the cost of gasoline.

Meanwhile, the enacted 2024 General Appropriations Act (GAA) provision on fuel subsidies for the transport sector now requires a shortened trigger period for the release of fuel subsidies to enable the timely distribution of subsidies to drivers and operators.

To help mitigate the second-round effects of toll rate hikes on food inflation, the government will soon release the guidelines for the implementation of the toll rate hike exemption for trucks catering to agricultural goods. The Department of Finance (DOF) is working closely with the Toll Regulatory Board (TRB) and tollway concessionaires toward the finalization of the said guidelines.

The expected completion of critical transmission projects in the first quarter of 2024, particularly the Mindanao-Visayas Interconnection project and the Cebu-Negros-Panay 230 kv Backbone Stage 3 shall also help moderate energy prices in the Visayas region by enabling the complementation between excess energy demand from Visayas and the energy surplus in Mindanao as well as address the ongoing grid disturbances in the island.

“In support of the Marcos Administration’s 8-point socioeconomic agenda, the economic team shall foster a balance between addressing the needs of Filipino workers and advocating for gradual increases in the minimum wage to mitigate possible second-round effects on the prices of consumer goods,” Secretary Diokno said.

The Inter-agency Committee on Inflation and Market Outlook (IAC-IMO)––co-chaired by the Secretaries of the DOF and the National Economic and Development Authority (NEDA)––will continue to utilize its newly enhanced dashboard in the timely monitoring of on-the-ground developments, such as the demand, supply, and prices of essential food commodities (i.e., rice, garlic, onion, pork, fish, chicken, sugar, and corn) as well as non-food items (i.e., rent, water supply, electricity, transport, education, and wages) which may contribute to food and non-food inflation.

The DBCC expects the inflation rate to return to the target range of 2.0 to 4.0 percent in 2024 until 2028.