Philippine inflation rate

[ANALYSIS] Taming runaway PH inflation: More difficult than it looks

JC Punongbayan

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[ANALYSIS] Taming runaway PH inflation: More difficult than it looks


Clearly there’s a gap between what the President is actually doing against inflation and the real situation on the ground

Everyone thought inflation – or the pace by which prices are rising – would subside starting January 2023.

Finance Secretary Benjamin Diokno recently claimed that inflation already “peaked” at 8.1% in December 2022. (Funnily enough, he’s been saying inflation peaked since August.)

For his part, Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla said last year that, “I’m almost sure the peak is in December, not January [2023].” BSP economists recently forecasted inflation in January to fall between just 7.5% and 8.3%.

Academics and analysts in the private sector, too, had a median inflation forecast of only 7.6% for January 2023.

Lo and behold, the Philippine Statistics Authority proved them all wrong.

Inflation in January turned out to be a whopping 8.7%, a lot higher than 8.1% in December, and still the highest since November 2008 or 14 years ago (Figure 1).

Figure 1.

In addition, inflation in the Philippines is now the highest among the biggest ASEAN economies (excluding Lao PDR and Myanmar, which have seen double-digit inflation since last year owing to the massive collapse of their respective currencies).

Clearly, we haven’t seen the worst of inflation yet. Prices are accelerating even more. What gives?


Many analysts thought that inflation would subside with the “ber” months over, as well as the consumption boost those months usually bring. There’s also a recent reduction in the price of LPG (liquefied petroleum gas). The peso is also a lot stronger now, making imports not as expensive as they were when the exchange rate nearly hit P60/$.

However, data show that food, electricity, and housing rent were the main culprits for worsening inflation. Figure 2 shows that food accounts for about half of total inflation, like in previous months.

Figure 2.

Food prices accelerated mainly because of vegetables, whose contributions to inflation have more than doubled since October (Figure 3). This, despite the drop of onion prices in marketplaces in recent weeks.

Figure 3.

What’s new in January is the extraordinary spike in electricity prices as well as home rental prices (Figure 4).

You see, the electricity rates of Meralco have risen for the past 3 months, mainly because of higher costs of generating power. For an ordinary household consuming 200 kWh of electricity a month, their bill jumped by P125 last January.

Meanwhile, property owners have increased their rental rates as the economy – notably schooling and work – has gone pretty much back to normal, and demand for housing units has increased.

Figure 4.

All this underscores the fact that inflation stems not just from food and energy prices, but also from non-food items in general. Figure 5 shows that “core inflation” (inflation sans food and energy prices) is still rising steadily. Note, too, that the poor feel inflation a lot worse at 9.7%, because more than half of their budget goes to food.

Figure 5.
What can be done?

President Marcos tried to reassure the public by saying they’ve “already taken some measures so that the [food] supply will be greater.”

But to a large extent, the inflation we’re seeing right now is linked to the economy’s recovery from the pandemic.

That is, even if you take away the inflation brought by food, overall prices will continue to rise from the sheer fact that we’re willing to go out and spend like we used to before the pandemic. There’s just so much “pent-up demand” and the government can’t do much about that.

This is not to say, however, that the government is totally helpless to at least try to abate inflation.

For one thing, with inflation as high as 8.7%, we can expect the BSP to further increase its interest rates in a bid to discourage borrowing and spending. However, this route takes quite long: there’s a gap of several months between the time the BSP raises its rates, as well as the time consumers slow down spending.

At the same time, note that despite the rise of interest rates last year, borrowing among consumers and producers has actually grown by double digits. People do not seem to be paying attention to the interest rate hikes for now.

The Department of Agriculture (DA), too, can still step up its game and implement policies that will ensure stable and reliable supply of basic foodstuffs this year.

Look at what happened to onions. The DA didn’t import onions around August 2022, and only did so in January 2023. Now, prices have plummeted from the heights of P600-P700/kg, to about P150-P200/kg. But if they had imported a lot earlier, onion inflation would have subsided early on. The same goes for other agricultural products.

President Bongbong Marcos can do a lot to try to mitigate inflation, and there’s a lot of expectations from him, who took on the role of agriculture secretary himself.

But more than seven months into the job, he’s done little in his power to abate food inflation. You might even say he’s done nothing or next to nothing, as evidenced by the data.

Instead, he lamented high inflation in January by saying it was “unfortunate,” but hoped it’s “as high as it’s going to get.”

In the latest poll by the Social Weather Stations, Marcos got a +74 percentage point satisfaction rating, and when it comes to fighting inflation he got +1. Really?

Clearly there’s a gap between what the President is actually doing against inflation and the real situation on the ground. This proves yet again what his mother once said: “Perception is real, the truth is not.” –

JC Punongbayan, PhD is an assistant professor at the UP School of Economics and the author of the forthcoming book, False Nostalgia: The Marcos ‘Golden Age’ Myths and How to Debunk Them. JC’s views are independent of his affiliations. Follow him on Twitter (@jcpunongbayan) and Usapang Econ Podcast.

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JC Punongbayan

Jan Carlo “JC” Punongbayan, PhD is an assistant professor at the University of the Philippines School of Economics (UPSE). His professional experience includes the Securities and Exchange Commission, the World Bank Office in Manila, the Far Eastern University Public Policy Center, and the National Economic and Development Authority. JC writes a weekly economics column for He is also co-founder of and co-host of Usapang Econ Podcast.