Low inflation in September is no reason for complacency with food remaining expensive, especially for the poorest Filipinos whose low earnings cannot cope with high prices, research group IBON said. The Marcos administration should not use the lower inflation to justify low wages, or reduce social protection or subsidies to increase agricultural productivity, said the group.
The Philippine Statistics Authority (PSA) reported the September 2024 inflation of 1.9% to be the lowest in four years (since the 1.6% in May 2020). This is also slower than the 3.3% in August 2024 and 6.1% in September 2023. The main drivers of this deceleration were slower price hikes in food and non-alcoholic beverages from 3.9% in August 2024 to 1.4% this September; a faster downtrend in transport inflation from -0.2% to -2.4% in the same period; and slower inflation in housing, water, electricity, gas and other fuels from 3.8% to 3.2 percent.
IBON pointed out that the slowdown in inflation is mostly due to lower global oil prices and the weakening dollar, rather than to any fundamental changes making the domestic production of goods and services cheaper. The import-dependent Philippine economy makes the country particularly vulnerable to changes in the price of imports including imported energy. The price of benchmark Dubai crude, for instance, is down to less than US$80 per barrel from highs of over US$90 per barrel earlier this year. The peso has also strengthened against the US dollar to Php56 compared to nearly Php59 a few months ago.
IBON noted that prices still rose although at a slower rate. The higher prices of food – especially rice – remain burdensome to consumers because wages and incomes keep falling short.
Rice inflation eased but the price of regular-milled rice in the National Capital Region (NCR), for instance, still increased by Php3 or about 7% from Php43 in September 2023 to Php46 in September 2024. Well-milled rice rose by Php4 (also 7%) from Php49 to Php53. But rice varieties priced over Php50 per kilo tend to be more common at the market, the group observed. Some one-third of domestic palay costs are from imported inputs, not yet counting further oil-dependent transportation costs to bring rice to retailers and consumers.
Official statistics also show that the prices of sweet potato, baguio beans, leafy vegetables, galunggong, chicken, and pork kasim went up by an average of Php12 in the same period.
Inflation is always higher for the poorest Filipinos, said IBON. Year-on-year inflation for the bottom 30% of Filipino households decreased to 2.5% in September from 4.8% in August 2024, but this is still higher than the 1.9% inflation for all income groups. Expensive rice impacts the poor more heavily because around 55% of their budget goes to food, according to the PSA.
IBON stressed that Filipinos’ wages aren’t keeping up with these high prices. IBON estimates that across all regions, the average nominal wage of Php448 is 63.1% short of the average family living wage (FLW) of Php1,213 for a family of five, as of September 2024. In the NCR, even with the July 2024 wage hike, the Php645 nominal wage is Php561 or 46.5% short of the Php1,206 NCR FLW. The disparity between the nominal wage and the FLW is most glaring in the Bangsamoro Autonomous Region of Muslim Mindanao (BARMM) with a nominal wage of Php361 which is 82.4% short of the region’s Php2,047 FLW.
The Marcos administration’s economic managers are confident that the inflation slowdown will boost consumer confidence, drive higher spending and consumption. IBON however cautioned against government complacency because the number of households without savings is increasing, which is an indirect indicator of depleting incomes. This increased by 1.2 million from a year ago to reach 19.2 million, or over seven-out-of-ten (71%) households, as of the third quarter of 2024, according to IBON estimates on Bangko Sentral ng Pilipinas (BSP) figures from the latest Consumer Expectations Survey (CES).
The group reminded that poor and borderline-poor families have also been on the rise, while about 8 of 10 employed Filipinos are in poor-quality, low-paying and insecure jobs. Meaningful wage hikes and substantial assistance to workers, their families, and other vulnerable sectors are still urgent to help them cope with the high cost of living, IBON stressed.
Government should also take steps to ensure cheaper and more efficient domestic production of Filipino goods and services instead of increasingly relying on the global market, the group said. Improved local production to meet the nation’s needs is the only long-term solution to job-creation as well as making basic goods and services accessible and affordable for Filipinos.
