Low rice prices will be temporary only

The cooling of inflation in September because of lower rice prices may be temporary and lead to greater volatility in domestic prices of the staple.

Economist Leonardo Lanzona of Ateneo de Manila University told  Business Mirror. he warned that a decrease in international rice prices could also make the country more dependent on imported rice.

This dependence may lead to the country’s increased vulnerability brought by global market prices. This could translate to higher inflation each time rice or oil prices would spike.

“The decline in inflation is fundamentally short-term in nature as this is driven by external factors. While these policies offer temporary relief, they expose the Philippines to risks associated with global market volatility,” Lanzona said.

The country’s tariff and monetary policies, in general, have allowed the economy to be immediately affected by international developments such as rising interest rates and prices, Lanzona added.

Think tank, Ibon Foundation Inc. said despite the slowdown in rice inflation to 5.7 percent, the price of regular-milled rice in the National Capital Region (NCR)  still increased by P3 or about 7 percent to P46 in September 2024 from P43 in September 2023 while well-milled rice rose by P4 or 7 percent to P53 from P49.

“But rice varieties priced over P50 per kilo tend to be more common at the market. Some one-third of domestic palay costs are from imported inputs, not yet counting further oil-dependent transportation costs to bring rice to retailers and consumers,” Ibon said.

Worth noting, Ibon also said, is the inflation experienced by the poorest Filipinos at 2.5 percent in September. This is slower than the 4.8 percent in August 2024 but was faster than the 1.9 percent average inflation rate experienced by all income households.

Ibon noted that expensive rice impacts the poor more heavily because around 54.93 percent of their budget goes to food. Based on the data from the Philippine Statistics Authority (PSA), rice has a weight of 17.87 percent in the Consumer Price Index of the poorest Filipinos.

The group also stressed that wages are not keeping up with high prices. Ibon estimated that across all regions, the average nominal wage of P448 is 63.1 percent short of the average family living wage (FLW) of P1,213 for a family of five, as of September 2024.

In the NCR, even with the July 2024 wage hike, the P645 nominal wage is P561 or 46.5 percent short of the P1,206 NCR FLW.  

The disparity between the nominal wage and the FLW is most glaring in the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM), with a nominal wage of P361 which is 82.4 percent short of the region’s P2,047 FLW.

“Government should also take steps to ensure cheaper and more efficient domestic production of Filipino goods and services instead of increasingly relying on the global market,” Ibon said.

“Improved local production to meet the nation’s needs is the only long-term solution to job creation as well as making basic goods and services accessible and affordable for Filipinos,” it added.