As the announcement for the May inflation rate is nearing, it is expected that price pressure from high rice prices will be a major factor in the country’s slightly elevated consumer price index (CPI) figure.

The country’s economic managers – particularly Socioeconomic Planning Secretary Arsenio Balisacan, and Finance Secretary Ralph Recto – said rice prices will only go down from the latter part of the year.

To recall, rice inflation has been on an uptrend since the latter part of 2023, hitting 19.6% in December last year, and peaking at 24.4% in March. The April rice inflation slightly went down to 23.9%, still an elevated level.

The high rice inflation since December last year has caused rice prices to increase by as much P60 to P70 per kilo, with the El Niño badly affecting local rice production. “We expect rice prices to go down by 20%, maybe by September. This would entail one, increasing production and second, reducing tariffs,” Finance Secretary Ralph Recto said.

Balisacan, for his part, also believes that rice prices will start to decline in the latter part of the year, adding that global supply and production of rice are also expected to Increase.

“Well, the forecast on global rice prices by the second half of the year, particularly by September, is going down. It’s already past El Niño and the election in India is over, so all those restrictions and exports of major exporting countries are expected to loosen,” he said.

“So that’s the forecast. So, as I said, the domestic prices simply reflect the trends in global prices, particularly for rice. So, as global prices come down, and provided our exchange rate will not sharply depreciate, which I don’t expect, then we should see domestic prices coming down,” he added.

MAY INFLATION FORECAST

As for the May inflation forecast, government economic managers forecast it to settle with the 2% to 4% range. The inflation rate for April was 3.8%, or slightly higher than the 3.7% of March. Inflation has been on an uptrend since February but the average inflation rate in from January-April this year is 3.45%, which is much lower than the 7.87% of the first four months of last year.

“We are still aiming for 2% to 4%, the target for the year. I think that we should be there,” Balisacan said.

“It [the May inflation] can be lower or it can be higher than 3.8%, but we expect to be in that range,” he added.

For its part, the Bangko Sentral ng Pilipinas (BSP) said in a report that analysts expect headline inflation to remain within the target range this year, but will settle at the upper range. Specifically, the BSP’s Monetary Policy May 2024 report stated that preliminary results of the central bank’s survey of external forecasters (BSEF) for this month showed that the mean inflation forecast for 2024 eased from 3.8% in April 2024 to 3.7%this month.

Mean forecasts for 2025 were unchanged at 3.5% but were higher for 2026 from 3.4% to 3.5%.

Supply chain disruptions were cited as the upside risks that will make inflation remain elevated. These include higher prices of basic goods such as oil and food, particularly rice caused primarily by geopolitical conflict in the Middle East, and the El Niño. The impact of the typhoons and storms that will be caused by the La Niña in the second half will also impact inflation this year.

“Meanwhile, a few analysts cited downside risks from easing albeit still elevated food and non-food inflation, such as rice and oil; and waning inflationary pressures on prices as El Niño and base effects weaken in the near term,” the report said.