Domestic food price inflation remains high

According to the World Bank, domestic food price inflation remains high in many low- and middle-income countries.

Inflation higher than five percent is experienced in 70 percent of low-income countries (6.2 percentage points lower), 47.8 percent of lower-middle-income countries (three percentage points lower), 36 percent of upper-middle-income countries (two percentage points lower) and 9.1 percent of high-income countries (0.2 percentage points higher).

In real terms, food price inflation exceeded overall inflation in 59.8 percent of the 164 countries where data are available.

Since the World Bank’s last update on Oct. 18, the agricultural and cereal price indices rose by one and two percent, respectively; the export price index remained unchanged. Maize prices increased by seven percent, while wheat and rice prices fell by five percent, respectively.

On a year-on-year basis, maize prices are nine percent lower and rice prices are eight percent lower, while wheat prices are one percent higher. Compared to January 2020, maize prices are nine percent higher, wheat prices are three percent lower, and rice prices are 29 percent higher.

The November 2024 Agricultural Market Information System (AMIS) Market Monitor highlighted various price fluctuations and policy changes in global agriculture in October. Wheat prices reached multi-month highs, largely because of weather-related planting delays in the northern hemisphere, but later eased as conditions improved.

Maize prices also increased slightly, even with swift harvest progress in the United States, whereas rice and soybean prices fell. In policy moves, India removed the minimum export price for non-basmati white rice, and Bangladesh and Turkey relaxed import restrictions on maize, rice, and vegetable oils.

In the most recent Commodity Markets Outlook, the World Bank projects a four percent decline in the agriculture commodity prices index in 2025 before stabilizing in 2026, after a two percent increase this year.

The report also summarizes concerns about food insecurity and notes that the world remains far from achieving the goal of zero hunger by 2030. Conflict, extreme weather and economic shocks are the major drivers of food insecurity. It is projected that food prices will decrease by four percent in 2025 before stabilizing in 2026.

The latest Hunger Hotspots Report by the Food and Agriculture Organization (FAO) of the United Nations and the World Food Program (WFP) warns of worsening acute food insecurity in 16 hunger hotspots (covering 22 countries and territories) that will require urgent action between now and May 2025. Conflict, climate and the economy are the primary drivers of food insecurity. Conflict continues to be the primary driver of hunger in 15 hotspots.

The Philippines, thankfully, is not yet among the countries suffering from acute food insecurity.

Specifically for Asia, the World Bank reports that East Asia and the Pacific remain highly vulnerable to the impacts of climate change, with extreme weather events becoming more frequent and severe.

Weather forecasters predict that La Niña conditions will prevail from October onwards, contributing to a chance of above-normal rainfall in several countries, including the Lao People’s Democratic Republic (PDR), the Philippines, Thailand and Vietnam.

Last month, Tropical Storm Trami or Typhoon Kristine hit several provinces on Luzon Island in the Philippines, resulting in widespread flooding and landslides, leaving at least 126 dead and missing. Many areas remain isolated, with people in need of rescue.

The cost of damage to the agricultural sector in the Philippines from Typhoon Kristine was estimated at P3.11 billion, with 74,554 farmers affected across 11 regions.

Damaged farmlands covered 72,329 hectares, with a production loss of 160,107 metric tons. The rice sector was the hardest hit, with losses of 152,440 metric tons and a value of P2.87 billion. High-value crops suffered P121.08 million in damage. Damage to agricultural infrastructure, including irrigation facilities and other farm structures, totaled P67.66 million.

The Department of Agriculture, however, reported that at least 60 to 70 percent of farmers in the affected areas had already harvested their palay (unhusked rice) before Kristine made landfall. However, the DA also predicted that palay production would likely drop by 3.24 percent this year due to the continued onslaught of tropical cyclones.

Following Russia’s invasion of Ukraine, trade-related policies imposed by countries have surged.

The global food crisis has been partially worsened by the growing number of food and fertilizer trade restrictions put in place by countries aiming to increase domestic supply and reduce prices. As of now, 17 countries have implemented 22 food export bans, and eight countries have implemented 12 export-limiting measures.

The World Bank’s food and nutrition security portfolio now spans 90 countries. It includes both short-term interventions such as expanding social protection and longer-term resilience initiatives such as boosting productivity and climate-smart agriculture. The Bank’s intervention is expected to benefit 296 million people.

In May 2022, the World Bank Group and the G7 Presidency co-convened the Global Alliance for Food Security, which aims to catalyze an immediate and concerted response to the unfolding global hunger crisis. The Alliance has developed the publicly accessible Global Food and Nutrition Security Dashboard, which provides timely information for global and local decision-makers to help improve coordination of the policy and financial response to the food crisis.

Last year, the heads of the FAO, IMF, World Bank Group, WFP and WTO released a third joint statement calling for preventive action against a worsening food and nutrition security crisis, with further urgent actions required to (i) rescue hunger hotspots, (ii) facilitate trade, improve the functioning of markets, and enhance the role of the private sector, and (iii) reform and repurpose harmful subsidies with careful targeting and efficiency.

They appealed for countries to balance short-term urgent interventions with longer-term resilience efforts as they respond to the crisis.

Source: Business World

Inflation picks up to 2.3% in October

Higher prices of key food items, particularly rice and transport costs, pushed inflation up in October, the Philippine Statistics Authority (PSA) reported on Tuesday.

Source: Business World

Consumer price growth accelerated to 2.3 percent last month from 1.9 percent in September, hitting the median estimate in a Manila Times poll of economists and also falling within the Bangko Sentral ng Pilipinas' (BSP) 2.0- to 2.8-percent forecast.

It was markedly lower than the year-earlier 4.9 percent and remained within the BSP's 2.0- to 4.0-percent target.

"The uptrend in the overall inflation in October 2024 was primarily influenced by the faster annual increment in the heavily-weighted food and non-alcoholic beverages at 2.9 percent during the month from 1.4 percent in September," the PSA said in a statement.

"Also contributing to the uptrend was transport with a slower year-on-year decrease of 2.1 percent during the month from a 2.4 percent annual drop in September 2024," it added.

Core inflation, which excludes volatile food and energy items, remained at 2.4 percent, but was lower than the 5.3 percent a year ago.

Year to date, headline inflation and core inflation averaged 3.3 percent and 3.1 percent, respectively.

Food inflation more than doubled to 3.0 percent last month from September's 1.4 percent and was attributed to rice inflation surging to 9.6 percent from 5.7 percent.

Food and non-alcoholic beverages accounted for the biggest share of overall inflation at 44.3 percent, or 1.5 percentage points, the PSA said.

"In addition, the index of corn also contributed to the uptrend as it recorded a faster annual increase of 9.7 percent during the month from 6.9 percent in September 2024," it noted.

The BSP, meanwhile, said that the latest inflation data was consistent with its assessment that consumer price growth would "continue to trend closer to the low end of the target range over the succeeding quarters."

"This reflects easing supply pressures for key food items, particularly rice," it added.

"Nonetheless, the balance of risks to the outlook for 2025 and 2026 has shifted toward the upside. Upside risks to the inflation outlook could emanate from the potential adjustments in electricity rates and higher minimum wages in areas outside Metro Manila, while downside factors continue to be linked to the impact of lower import tariffs on rice."

The policymaking Monetary Board, it continued, will "maintain a measured approach in its easing cycle to ensure price stability conducive to sustainable economic growth and employment."

Socioeconomic Planning Secretary Arsenio Balisacan said the latest inflation figures were a confirmation that government efforts to keep a lid on price growth were working.

While recent weather disturbances, including Severe Tropical Storm Kristine, have posed significant challenges to food supply and logistics, "the government is working relentlessly to keep food available and prices steady, particularly for essential commodities," he added.

"With targeted support and streamlined food supply chains, we aim to ensure that food is affordable and accessible for Filipino families, especially those most vulnerable to price shocks when disasters hit us."

Albay 2nd District Rep. Joey Salceda, an economist, also said that inflation was likely to end the year within target.

"This will also give the BSP license for further rate cuts, especially since expected OFW (overseas Filipino worker) remittances this December will give them some room on the currency strength side," he added.

While rice inflation "remains a fundamental problem," substantial import tariff cuts ordered in July "seems to have produced positive results, while keeping farmgate prices high for farmers."

Source: Manila Times

Economy below-target growth likely

The Philippine economy "is in need of further support," a London-based research firm said, warranting more rate cuts by the Bangko Sentral ng Pilipinas (BSP).

In a report released last Friday, Capital Economics noted that gross domestic product growth had slowed to 0.5 percent quarter on quarter, from 0.9 percent in the first three months of 2024, due to declines in private consumption and exports.

"Looking forward, fiscal tightening and weak export demand should keep growth subdued," it said.

Gross domestic product (GDP) growth currently stands at the bottom end of this year's downwardly revised target of 6.0-7.0 percent.

Economic managers have been saying that the target will likely be achieved and also raised the possibility that the goals could be raised given slowing inflation and increased government spending.

The BSP, Capital Economics said, will likely order a 25-basis point (bps) rate cut this Wednesday in a repeat of an August decision that kicked off an easing cycle.

Another cut is expected in December, with more in 2025, and the central bank's policy rate will likely end next year at 4.75 percent, it added.

This "makes us more dovish than the consensus," Capital Economics said.

It also noted that inflationary pressures were weak, with headline inflation having fallen to 1.9 percent in September — below the BSP's 2.0- to 4.0-percent target.

"Our forecast is that a combination of weak economic growth and falling food price inflation will keep [overall] inflation low," the research firm said.

Japanese investment bank Nomura, meanwhile, also expects the BSP to announce a 25-bps cut this week and again in December as it pursues a data-driven approach to setting monetary policy.

"We think BSP will cite the decline in headline inflation that allows it to further reduce the restrictiveness of its monetary stance in a calibrated manner, amid soft domestic demand conditions and a negative output gap," it said in a report last week.

A 25-bps cut will bring the BSP policy rate to 6.0 percent.

"[U]nlike other regional central banks, BSP adheres more strictly to its inflation targeting framework and will be more driven by the latest data outturns on inflation," Nomura said.

The outlook for inflation, Nomura added, suggests that it will remain slightly below target in the coming months; thus, Wednesday's "policy statement and comments in the press briefing are therefore also likely to remain dovish, with BSP continuing to comment that it sees scope to deliver more rate cuts."

It added that while the Monetary Board could raise its inflation forecasts to take into account higher crude oil prices, these will likely still be considered "target-consistent."

The BSP is also expected to declare that inflation expectations are well-anchored, which will set the " stage for another 25 basis points cut, which we forecast at the last monetary board meeting of the year in December," Nomura said.

While the US Federal Reserve's easing cycle also supports further BSP easing, the Philippine central bank is not expected to copy the Fed's jumbo 50-bps cut last month.

"The substantial RRR (reserve requirement ratio) cut is already providing additional easing, and [BSP] Governor [Eli] Remolona said he prefers 25bp increments in the policy rate," Nomura said.

The central bank last month announced a 250-bps cut in the RRR for universal and commercial banks and non-bank financial institutions with quasi-banking functions; 200 bps for digital banks; and 100 bps for thrift banks, rural banks and cooperative banks.

The new ratios will take effect on October 25.

Source: Manila Times