A disturbing development, which is an aberration in the Philippine journey to complete its recovery from the devastation of the pandemic, was the 8.7 percent inflation shock for January.
The elevated prices were mostly the result of food costs shooting up. The government had tried to address the problem through importation but opportunists exploited the relaxed importation rules to engage in outright smuggling.
Inflation accelerated to a new 14-year high of 8.7 percent in January, driven by rising utility, housing, and food costs.
The fastest recorded headline rate since November 2008 surpassed the 8.1 percent logged in December and was well above the 3 percent seen in January last year.
Inflation had peaked in December, Bangko Sentral ng Pilipinas Governor Felipe Medalla said earlier, but it turned out that the rise in prices in January was higher.
The expectation was that the imports would somehow ease prices since the scarcity in supply would be addressed.
Prices, however, remained elevated as some traders are suspected of hoarding farm products, keeping prices high.
The prices of imported agricultural goods are also kept high by the string of shipping charges which strangely are exclusively applied to the country.
Among the worthy proposals that are expected to make a strong impact on the prices of commodities, and thus the periodic inflation rate is the push to automate local port operations.
Aside from monitoring shipments, cargoes from the ports will be tracked, thus minimizing the opportunity for irregularities.
The impact becomes more substantial considering the string of charges that shipping firms impose that all end up as pass-on costs on imported commodities.
The surge in prices, in turn, triggered concerns in the Bangko Sentral ng Pilipinas which has the mandate to rein in inflation through the adept adjustment of loan rates. These loan rates are what banks earn by parking their funds overnight with the central bank. Since such short-term borrowings are backed by the state, they are practically risk-free and a good scheme to mop up liquidity.
The balancing act of the BSP thereafter becomes more intricate as too much money removed from circulation constricts economic activity.
The faster-than-expected increase in commodity prices is a sure trigger for a new policy rate hike after the 3.5 percentage points total increase in 2022.
Another issue that requires immediate action is the price tussle between San Miguel Corp. and Meralco that had reached the Court of Appeals, resulting in higher electricity rates.
Meralco was forced to purchase more expensive electricity from the Wholesale Electricity Spot Market after the CA brought down the hammer on the Energy Regulatory Commission and in effect reversed the regulator’s decision to block the SMC petition for a rate increase.
SMC is seeking a temporary increase in the price of the electricity that its energy arm, SMC Global Power Corp., sells.
The ERC, however, ruled to reject the petition considering the straight pricing scheme of the power supply agreements that do not allow rate increases.
The statistics agency said housing, water, electricity, gas and other fuel prices were other key factors behind the overall inflation uptrend. Prices in this group jumped 8.5 percent on the year in January, versus 7.0 percent in December.
Food inflation, meanwhile, accelerated to 10.7 percent from 10.2 percent in December, due to higher prices of vegetables such as onions.
President Ferdinand “Bongbong” Marcos Jr. has termed rising food prices as an “emergency” that deserves full government attention.
A holistic approach is needed since the factors for the price increases go beyond the principle of supply and demand. The price of onions, for instance, has rocketed to the high heavens despite there being a glut in some provinces.
The experience of the recent sugar importation fiasco indeed showed that the market can easily be manipulated in terms of prices to induce importation.
There are periods of shortage for a particular product but certain periods through the manipulation of some groups become a crisis that is turned into a money-making opportunity.