Philippine inflation likely eased in November – poll

By Katherine K. Chan

HEADLINE INFLATION likely eased in November as lower prices of food, particularly rice, may have tempered higher utility costs during the month, analysts said.

A BusinessWorld poll of 15 analysts yielded a median estimate of 1.6% for November inflation, within the Bangko Sentral ng Pilipinas’ (BSP) 1.1-1.9% month-ahead estimate.

If realized, last month’s consumer price index (CPI) eased from the 1.7% clip in October and 2.5% logged a year ago.

It could also be the slowest clip in three months or since the 1.5% seen in August, and could mark the ninth straight month that inflation fell below the central bank’s 2-4% target.

A 1.6% November inflation print would bring the 11-month average inflation to 1.7%, matching the central bank’s forecast for the year.

The Philippine Statistics Authority is scheduled to release November inflation data on Dec. 5.

Maybank Investment Bank economist Azril Rosli said inflation likely slowed in November as food price pressures eased.

“Easing food price pressures, particularly in staple commodities such as rice and vegetables, were driven by improved supply conditions during the harvest season,” Mr. Rosli said in an e-mail.

Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics, said the latest food price figures suggest food inflation likely continued to slow but not “below zero” as previously expected.

Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion said disinflationary pressures remained dominant in November, particularly rice deflation.

“Continued price declines in rice — a high-weight item in the CPI basket — acted as a powerful dampener on overall inflation,” he said in an e-mail. “This trend has been well-documented and remains a key driver of the low headline reading.”

Latest Department of Agriculture data showed that the average price of local regular milled rice fell by 16.45% to P37.28 per kilo in the Nov. 10-15 period from P44.62 per kilo a year ago. Well-milled rice likewise declined by an annual 11.68% to P42.33 per kilo from P47.93, while special rice inched down by 5.12% to P56.92 per kilo from P59.99 in 2024.

The ban on rice imports, which was originally scheduled to end on Nov. 2, was extended until end-2025.

Mr. Asuncion said price movements in other agricultural products were “mixed,” noting that limited new data on vegetables and perishables could introduce “some uncertainty.”

ANZ Research Chief Economist for Greater China Raymond Yeung and economist Vicky Xiao Zhou said a “modest increase” in electricity rates could have driven utility inflation higher.

Manila Electric Co. raised the overall electricity rate for a second month in a row in November by P0.1520 per kilowatt-hour (kWh) to P13.4702 per kWh.

“Relatively stable global crude oil prices coupled with the peso’s resilience against the US dollar helped anchor transport and utility costs,” Mr. Rosli said. “Furthermore, tempered domestic demand and the transmission effects of the BSP’s previous monetary policy adjustments continued to exert disinflationary pressure.”

Angelo B. Taningco, chief economist at Security Bank, said the peso depreciation may have also contributed to November inflation.

The peso finished stronger versus the greenback at P58.645 per dollar at end-November, climbing by 20.5 centavos from P58.85 at end-October. It recovered slightly after ending at the P59 level several times last month, even hitting a new record low of P59.17 on Nov. 12.

MORE ROOM TO CUT
Analysts continue to see full-year inflation falling below the BSP’s 2-4% target, leaving room for a more accommodative policy stance for the central bank.

“We project inflation to average below the BSP’s target range this year. It is expected to pick up to within the target range next year, largely due to base effects,” Chinabank Research said.

Mr. Chanco said the BSP’s 1.7% forecast for this year is “still on track, though the risks are tilted slightly to the downside.”

Mr. Asuncion said he sees inflation averaging 1.6% this year due to persistent rice deflation, subdued energy costs and muted food price pressures.

“Demand-side pressures remain muted, and upside risks — such as supply shocks or geopolitical tensions — are unlikely to materially alter the year-end trajectory,” he said.

Reinielle Matt M. Erece, an economist at Oikonomia Advisory & Research, Inc., said he expects the BSP to cut by 25 bps at its Dec. 11 meeting.

“If we add the slow economic growth to the equation, it’s almost guaranteed that the BSP will remain on their monetary policy easing path,” he said in a Viber message.

In the third quarter, the Philippine economy expanded by 4% year on year, slowing from 5.5% in the second quarter and 5.2% a year ago. This brought economic growth as of September below the government’s 5.5-6.5% full-year target at 5%.

“Consequently, inflation should remain subdued, and we expect the Bangko Sentral ng Pilipinas to deliver two additional 25-bp rate cuts during the current easing cycle,” ANZ Research’s Mr. Yeung and Ms. Zhou said. 

The central bank has reduced key borrowing costs by 175 bps since it began its easing cycle in August 2024, bringing the policy rate to a three-year low of 4.75%.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said headline CPI will likely remain below the BSP’s target until March next year, before accelerating to 2% to 3% from April until December due to base effects. 

The BSP projects inflation to return to the target band at 3.1% next year, before slowing to 2.8% in 2027.