Philippines Inflation Slows to 6.2% in July, Still Above Target

MANILA, Philippines — Inflation in the Philippines slowed for the third consecutive month in July, easing to 6.2 percent from 6.4 percent in June, according to the Philippine Statistics Authority (PSA). National Statistician Dennis Mapa stated in a press briefing that while the July figure is a welcome deceleration, it remains substantially higher than the 0.9 percent recorded in the same month last year. The downtrend in overall inflation was primarily driven by a slower increase in transport costs, which rose by 11.9 percent in July compared to 12.8 percent in June. Economic Planning Secretary Arsenio Balisacan remarked that these slower price increases indicate that government interventions are helping to ease the impact on households. "While inflation is moving in the right direction, our work is far from over. We will continue advancing measures to keep essential goods affordable while creating more opportunities for a better quality of life," Balisacan said. Malacañang also welcomed the inflation figures as "encouraging developments." However, Palace press officer Claire Castro cautioned that the administration remains vigilant due to geopolitical tensions in the Middle East and the continuing effects of El Niño, which pose risks to food and energy prices. "Our broader objective remains clear: to reduce the cost of daily living, strengthen food and energy security, safeguard the purchasing power of Filipino households, and sustain economic growth that benefits every Filipino family," she added. Mapa, however, cautioned that despite the three-month downtrend, risks remain that could drive inflation up. He noted that price movements in commodities with substantial weights, such as food and electricity, are expected to affect overall inflation. "We have to see the trend, if this will continue in the next months," he said. Other factors contributing to the July inflation included a slower increase in education service rates (1.9 percent from 4 percent) and restaurant and accommodation services (6.8 percent from 7 percent). Food inflation, however, remained steady at 5.3 percent in July. This was due to lower meat prices and slower increases in vegetable prices, which offset sharper rice inflation. Rice inflation rose to 17.1 percent in July from 15 percent in June, marking the highest increase since July 2024 when it reached 20.9 percent. From January to July, the average inflation stood at 5 percent. Sarah Tan, assistant director-economist at Moody's Analytics, predicted that disinflation would continue but at a slow and uneven pace. She emphasized that the outlook largely depends on developments in the Middle East and their impact on global commodity prices, as well as the looming El Niño phenomenon. "Hotter and drier conditions in the second half of the year could weigh on agricultural output, exacerbating food supply constraints and putting further upward pressure on food prices," Tan said. S&P Global Ratings also highlighted the Philippines' exposure to heightened food inflation and agricultural risks from a potentially severe El Niño. The debt watcher identified the Philippines alongside India, Vietnam, and Indonesia as Asian economies facing sharp price increases and greater vulnerability to weather-related supply disruptions. Food accounts for 35 percent of the Philippine consumer price index, one of the highest among the assessed South and Southeast Asian economies. Agriculture represents about nine percent of the domestic economy. S&P noted that rice, sugarcane, and coconut are among the Philippine crops most likely to be affected by El Niño. Reduced rainfall could also disrupt hydropower generation. The agency explained that the El Niño episode would affect the Asia-Pacific mainly through weaker rainfall and broader climate disruptions, impacting agricultural output, food prices, hydropower generation, and potentially leading to vegetation fires and haze. Lower rainfall could reduce crop yields, delay planting and harvesting cycles, and weaken rural incomes. Disruptions in food supply chains and higher consumer prices are potential consequences. However, S&P pointed out that food inflation across Asia remains below the widespread price surge recorded in 2022, giving policymakers some room to manage expected price increases. For the Philippines, contingency planning, advance food imports, and coordination with farmers were identified as key measures to limit supply disruptions.