Economists warn of further price increases as peso weakness, higher fares and imported goods add pressure on household budgets
DAVAO CITY (November 3) — Filipino households may have faced another round of rising prices in October, as higher fuel, transportation and food costs, along with the weakening peso, continued to push up the cost of basic goods and services.
Inflation could have accelerated to 7.7 percent in October from 7.2 percent in September, according to the median forecast of economists surveyed by The Manila Times, signaling that the pressure on household budgets may persist in the coming months.
The projected rate is also significantly higher than the 1.7 percent inflation recorded in October last year.
For consumers, sustained inflation means having to spend more for everyday necessities, including food, electricity and transportation, leaving less money for other household needs.
The Philippine Statistics Authority (PSA) is scheduled to release the official October inflation figures on November 5.
The latest projection follows September’s acceleration in headline inflation, which rose to 7.2 percent from 6.1 percent in August, bringing the January-to-September average to 5.4 percent.
PSA data showed that food and non-alcoholic beverages were among the major drivers of the September increase, with inflation in the category accelerating to 6.7 percent from 4.6 percent in August.
Housing, water, electricity, gas and other fuels also recorded faster price increases, with inflation reaching 8.4 percent from 7.9 percent.
Transport inflation climbed to 14.6 percent from 13.5 percent, reflecting the continuing impact of higher fuel and transportation costs.
Transport and food drive price pressures
Economists offered varying October estimates, although most expected inflation to remain elevated.
Pantheon Macroeconomics economist Miguel Chanco projected inflation at 7.3 percent, saying higher transportation costs could be partly offset by easing food inflation.
He attributed the expected increase mainly to continued fuel-price pressures, which could push transport costs higher even as some food prices begin to ease.
Philippine National Bank economist Alvin Arogo forecast October inflation at 7.4 percent and projected it could peak at 7.6 percent in February next year.
Rizal Commercial Banking Corp. chief economist Michael Ricafort placed the estimate at 7.6 percent, citing the peso’s depreciation and its effect on the cost of imported goods.
He also pointed to higher minimum wages in Metro Manila and other regions, which could translate into higher prices of affected goods and services.
Bank of the Philippine Islands lead economist Emilio Neri Jr. projected inflation at 7.7 percent, warning that earlier price increases were spreading to other parts of the economy, including transportation fares and wages.
The weaker peso has also made imported fuel and food more expensive, while increasing the cost of power supply contracts denominated in US dollars, he said.
Neri cautioned that inflation may not have peaked this year, with November inflation potentially exceeding 8 percent if current price pressures continue.
Peso weakness and weather risks
The highest October projections, at 7.8 percent, came from Chinabank economist Domini Velasquez, UnionBank chief economist Ruben Carlo Asuncion and Metrobank chief economist Nicholas Antonio Mapa.
Velasquez cited higher transportation fares, electricity costs and food prices as key contributors to the expected acceleration.
Bus, jeepney and taxi fares increased following adjustments approved in late September, while higher electricity rates, particularly in areas served by Manila Electric Co. (Meralco), added to household expenses.
She also projected core inflation to rise to 5.4 percent, suggesting that price pressures were spreading beyond the more volatile food and energy categories.
Velasquez warned that inflation could accelerate further and peak in November as El Niño adds to food supply pressures.
Asuncion said the weaker peso was raising the cost of imported fuel, food and other goods, while persistent supply-side constraints continued to keep prices elevated.
Although some agricultural commodity prices showed signs of easing in early October, he said further peso depreciation, higher global oil prices, weather-related supply disruptions and stronger second-round effects could prolong inflation.
Mapa identified supply pressures involving rice, meat, fish and energy-related products as major factors behind the continuing price increases.
BSP faces pressure to contain inflation
The economists’ median forecast of 7.7 percent falls within the Bangko Sentral ng Pilipinas’ (BSP) October inflation projection range of 7.1 to 8.1 percent.
The central bank said it would remain vigilant and assess incoming data, particularly inflation and economic growth prospects, as well as the impact of developments in the Middle East on the country’s economic outlook.
The prospect of another interest rate increase in December has also emerged as economists weigh the need to contain inflation against the risk of slowing an already fragile economy.
Neri said further rate hikes may be necessary to support the peso, prevent initial price increases from spreading across other goods and services, and keep inflation expectations under control.
Mapa, however, said the BSP would likely return to a measured pace of monetary tightening to balance the fight against inflation with the need to avoid placing additional pressure on economic growth.
For ordinary consumers, the policy challenge goes beyond controlling headline inflation. Persistent increases in food, transport and utility costs mean households must continue adjusting their spending even as authorities consider measures to stabilize prices.
The November 5 PSA report will show whether October’s price pressures were as severe as economists expect—and provide a clearer indication of how much longer Filipino families may have to contend with rising living costs.
