The country’s headline inflation rate slid to 4.7 percent in July 2023, marking the sixth consecutive month of deceleration. This is within the month-ahead forecast range of the Bangko Sentral ng Pilipinas (BSP) of 4.1 to 4.9 percent.

“Headline inflation cooled further to 4.7 percent in July 2023 from 5.4 percent in June. This is the sixth consecutive month that inflation has eased, strongly supporting the likelihood that inflation might be within the 2.0 to 4.0 percent target range by the fourth quarter of 2023,” Finance Secretary Benjamin E. Diokno said.

The July 2023 inflation rate is at its lowest level since the 4.9 percent in April 2022. It was below the median estimate of 4.9 percent by private analysts.

The downtrend in inflation was primarily due to the slower increase in Housing, water, electricity, gas and other fuels (4.5 percent in July from 5.6 percent in June); Food and non-alcoholic beverages (6.3 percent from 6.7 percent); and Transport (-4.7 percent from -3.1 percent). However, inflation in Education increased to 3.7 percent in July from 3.6 percent in June.

Seasonally adjusted month-on-month (MoM) inflation was at zero percent monthly growth rate in July 2023 from a 0.1 percent uptick in the previous month.

The main contributors to headline inflation for the month of July are Food and non-alcoholic beverages, contributing 2.4 percentage points (ppt); Housing, water, electricity, gas and other fuels (1.0 ppt); and Restaurants and accommodation services (0.8 ppt).

While food inflation continued its downward trend for the sixth consecutive month at 6.3 percent, it continues to be the main source of headline inflation led by vegetables (0.6 ppt); rice (0.4 ppt); flour and bread (0.3 ppt); as well as milk and eggs (0.3 ppt).

Meanwhile, the deceleration in food inflation was led by the decline in prices of meat (-1.7 percent from 0.3 percent), and the slowing down of price increase for fish (4.5 percent from 6.2 percent) and sugar (21.4 percent from 28.9 percent).

Top contributors to the non-food inflation are Food and beverage services (0.76 ppt), Actual rentals for housing (0.65 ppt), and Passenger transport services (0.33 ppt).

Core inflation, which excludes selected volatile food and energy items, slowed down to 6.7 percent from the 7.4 percent recorded in June, bringing the average core inflation for the first seven months of the year to 7.6 percent.

Inflation in the National Capital Region (NCR) remained at 5.6 percent, while inflation for areas outside of NCR decelerated to 4.4 percent.

Region VIII (Eastern Visayas) recorded the lowest inflation rate at 2.4 percent, while Region VI (Western Visayas) had the highest inflation rate at 5.8 percent.

Inflation for the bottom 30 percent households, which has been rebased to the year 2018, declined to 5.2 percent, from 7.2 percent a year ago, and 6.1 percent in June 2023, resulting in a YTD inflation of 7.6 percent.

The main sources of deceleration in inflation for the bottom 30 percent households were lower inflation rates of Food and non-alcoholic beverages (6.1 percent); Housing, water, electricity, gas and other fuels (3.0 percent); and Transport (-3.0 percent), respectively contributing 49.3 percent, 31.3 percent, and 12.4 percent to the downtrend in inflation.

The Economic Development Group (EDG) held its second session in a Joint EDG and Inter-Agency Committee on Inflation and Market Outlook (IAC-IMO) Meeting on July 20, 2023.

It discussed the continuous implementation and the intensification of measures to monitor prices and the demand- and supply-side risks in both food and non-food commodities in view of safeguarding the Filipino people’s purchasing power against potential inflationary impacts of weather and external-related uncertainties, the impending El Nino, and transportation and wage hike petitions.

To ensure food security, particularly in rice, the government will intensify the proper utilization of the calamity fund and Quick Response Fund to help farmers.

“The private sector will be encouraged further to fill in any supply deficit through timely importation and the government will facilitate the arrival of needed imports, particularly during the lean season,” Secretary Diokno said.

The government will also expedite the implementation of measures to mitigate the impact of El Niño as discussed by the National El Niño Team (NENT) to ensure food security.

These include the provision of production inputs such as early maturing/short gestation/drought tolerant seed and planting materials), adjustment of the cropping calendars, construction or installation of rainwater harvesting structures and small scale irrigation systems, and distribution of pump and engine sets, among others.

Measures will also be implemented by the government to facilitate the issuance of sanitary and phytosanitary import clearance (SPSIC) and the enactment of a policy on the automatic approval of SPSIC application, and the issuance of importation guidelines by the Sugar Regulatory Administration (SRA) with a more predictable regime that allows industrial users to directly import their sugar requirements and facilitates greater competition.

Information technology, such as satellite imaging and crop growth models, is also increasingly being utilized by the government to help enhance the monitoring of the production of rice and other key agricultural commodities. The latest technologies will help provide more timely information for policy decisions of the government.

To support the vulnerable sectors, the government will continue its Targeted Cash Transfer (TCT) program and fuel subsidy program.

Landbank’s Anti Bill Shock Program will also cushion the impact of high electricity prices for end-users. The program provides financing to electric distribution companies at concessional rates with no additional cost on their working capital. This will protect consumers from paying higher electricity bills due to the increase in power consumption.

On the fiscal side, the government maintains its commitment to fiscal responsibility through the Medium-Term Fiscal Framework (MTFF) – the government’s blueprint to lower the fiscal deficit and avoid adding up to inflationary pressures.

In the first semester of 2023, the National Government (NG) deficit settled at PHP 551.7 billion, lower by 18.2 percent compared to the same period in 2022.

“The economic team remains steadfast in maintaining inflation at manageable levels to preserve the purchasing power of the Filipino people and to sustain macroeconomic stability while promoting a robust economic growth,” Secretary Diokno said.