DESPITE record-high oil and food prices last year, the country’s full-year inflation rate remained at the single-digit level of 9.3 percent, according to the latest report released by the National Statistics Office (NSO). The tempered result was partly attributed by the socioeconomic-planning agency to the pull-down effect of lower fuel and food prices in December, as worldwide demand eased with the initial impact of the global economic crisis.

The Bangko Sentral ng Pilipinas (BSP) found the report of inflation in retreat as “an auspicious beginning” for the new year.  BSP Governor Amando Tetangco Jr., in a text message to reporters, noted that core inflation, which takes away the more volatile components as rice and oil from the consumer price index, has similarly slowed down, as well.

“As inflation risks, particularly from food and oil prices, continue to recede, we will carefully consider opportunities for monetary easing, mindful of potential tightening financial conditions,” Tetangco said.

However, while the inflation rate for the whole of 2008 was within the 9 percent to 11 percent inflation target range of the BSP and the National Economic and Development Authority (Neda), the inflation rate was still high, according to some economists.

The NSO said year-on-year headline inflation rate in the Philippines decreased and settled at 8 percent in December from 9.9 percent in November.Full-year inflation last year was at 3.9 percent.

Excluding selected food and energy items, core inflation eased to 7.3 percent in December from 7.9 percent in November. The annual average core inflation rate in 2008 was at 6.2 percent in 2008 from 2.8 percent in 2007.

Former budget secretary Benjamin Diokno said that compared with the wage adjustments of around 5 percent in the past, inflation of 9.3 percent in 2008 was still high. However, he said wages are not expected to increase any time soon because of the global economic slowdown.

While 2009 will see lower inflation, it will still be at a relatively high 7 percent, said Diokno. He said that the full-year inflation recorded in 2007, of 2.8 percent, will not be seen this year due to the possibility that oil prices along with food prices could rise.

He thinks it may take a while for food inflation rate to decrease, considering the population continues to increase and food supply will keep declining.

Nonetheless, the acting director of the University of Santo Tomas Research Cluster for Culture, Education and Social Issues said that overall, a single-digit inflation is already good news for the public.

Dr. Alvin Ang said that with higher inflation, there is more room for interest- rate adjustments that could help Filipinos and companies based in the country to lower their debts. This could also help boost the savings rate of  individuals, if inflation continues to decline.

However, Ang said that despite the prospects of lower inflation in 2009, the inflation rate in 2007 will not be attained in 2009 because of the base effect.

For his part, Neda Director General Ralph Recto is confident that with single-digit full-year inflation in 2008, the government’s inflation targets in 2009 will have a higher chance of being achieved.

“Given the shocks to inflation this past year, the target for 2009 will fall within the Development Budget Coordination Committee forecast of 6 percent to 8 percent. Nevertheless, inflation is expected to return within target rates in 2010,” Recto added.

The NSO said the lower inflation rate in December was affected by the negative annual growth rate posted in the fuel, light and water (FLW) index and the continued slowdown in the annual price increases of the heavily weighted food, beverages and tobacco (FBT) and the services index.

Neda’s Recto said lower fuel and energy prices pulled down December inflation, as prices of crude oil fell in the international market due to a slackening worldwide demand, despite announcements of production cuts by members of the Organization of Petroleum Exporting Countries.

“Reports from the International Energy Agency estimate that worldwide demand for crude oil declined in 2008, the first time that global demand decreased since 1983. This precipitated price rollbacks of local fuel products in December,” he explained.

As of mid-December, the Neda said in a statement, prices of Dubai crude oil were lower by $8 per barrel than the November average price, while local retail prices of unleaded gasoline and diesel were down a peso per liter.

“Electricity prices also declined during the month. According to a prominent electric company, the use of ‘banked’ gas, like natural gas that was contracted but not consumed for a certain year but made available for future use, reduced generation charges by P0.45 per kilowatt- hour,” Recto added.

The NSO said the annual average inflation for food alone in 2008 was higher at 13.6 percent compared with 3.3 percent a year ago.

The 2008 annual average inflation rate in the FBT index was higher at 12.9 percent from 3.3 percent in 2007; clothing, 4.2 percent from 2.3 percent; housing and repairs (H&R), 4.3 percent from 1.5 percent; FLW, 6.5 percent from 3.2 percent; services, 8.6 percent from 2.8 percent; and miscellaneous items, 2.9 percent from 1.6 percent.

In December, the annual inflation rate for food alone in the Philippines further improved to 13.3 percent in December from 14.5 percent in November.

The annual price increase in rice was slower at 28.7 percent in December from 30 percent in November; cereal preparations, 18.6 percent from 19.3 percent; dairy products, 11.9 percent from 12.9 percent; fish, 9 percent from 9.6 percent; fruits and vegetables, 7 percent from 11.7 percent; and miscellaneous foods, 8 percent from 8.6 percent.

On the other hand, a higher annual price hike was posted in eggs at 5.7 percent from 5.5 percent while the annual price gains in corn and meat remained at their corresponding last month’s rates of 26.3 percent and 9.1 percent, respectively.

Meanwhile, annual inflation rate in the National Capital Region (NCR) also slowed to 4.5 percent in December from 6.8 percent in November. This was traced to the slower annual price increments of all commodity groups except for H&R and the miscellaneous index.

The annual average inflation in the area for 2008 was 6.9 percent, higher by 4.3 percentage points than the 2.6 percent in 2007.

The annual average inflation rate for food in the NCR was at 10.5 percent in 2008, higher by 7.2 percentage points than the 3.3 percent in 2007.

The annual average inflation for all commodity groups in NCR was higher in 2008 compared to last year’s rates except for FLW, whose annual average inflation at 2.8 percent was lower compared to 3.0 percent in 2007.

The NSO said the annual average inflation for the FBT index was at 10.1 percent in 2008 from 3.3 percent in 2007; clothing, 5.1 percent from 2.7 percent; H&R, 2.5 percent from 1.2 percent; services, 9.5 percent from 3 percent; and miscellaneous items, 1.9 percent from 1.2 percent.

In December, inflation rate for food alone in NCR decreased to 8.4 percent in December from 9.5 percent in November.

Negative annual rates were correspondingly posted in the eggs and fruits and vegetables indexes at -1.2 percent and -0.5 percent in December from their respective last month’s rates of -1.9 percent and 7.2 percent.

The NSO said the annual price increase in rice was slower at 27 percent from 27.4 percent; corn, 0.7 percent from 2.4 percent; cereal preparations, 18.1 percent from 19.3 percent; dairy products, 10.9 percent from 11.9 percent; and miscellaneous foods, 5.4 percent from 6.1 percent.

On the other hand, the annual inflation for fish and meat were higher at 6.1 percent and 6.3 percent, respectively, from their corresponding last month’s rates of 5.6 percent and 5.5 percent.

Meanwhile, the annual price movements in Areas Outside the National Capital Region (AONCR) followed the same trend, as its average inflation for the year was higher at 10.4 percent compared to 2.8 percent in 2007.

The AONCR’s year-on-year inflation, however, slowed to 9.6 percent in December from 11.2 percent in November. This was due to the slower annual price increments in the FBT and services indexes along with the negative annual price adjustments in the FLW index.

The 2008 average inflation of the food group alone at 14.6 percent was higher by 11.4 percentage points from 3.2 percent in 2007.

Compared with last year, all the commodity groups in the AONCR have higher annual average inflation rates in 2008. Annual average inflation for FBT was recorded at 13.8 percent from 3.2 percent; clothing, 3.9 percent from 2.2 percent; H&R, 5.7 percent from 1.8 percent; FLW, 8.5 percent from 3.3 percent; services, 8 percent from 2.6 percent; and miscellaneous items, 3.3 percent from 1.7 percent.

On an annual basis, prices of food items alone in AONCR slipped to 14.8 percent in December from 16 percent in November.

Annual price gains in rice was at 28.9 percent in December, slower than the 30.3-percent growth in November as all the regions except Mimaropa and Western Visayas posted lower annual rates. Eastern Visayas recorded the biggest slowdown of 4.7 percentage points (32.9 percent from 37.6 percent).

Annual price hikes in cereal preparations improved somewhat, posted at 18.8 percent from 19.4 percent; dairy products, 12.4 percent from 13.3 percent; fish, 9.6 percent from 10.4 percent; fruits and vegetables, 9.3 percent from 13.1 percent; meat, 10.3 percent from 10.8 percent; and miscellaneous foods, 9.2 percent from 9.7 percent.

However, annual price increments in the corn and eggs indexes remained at 26.7 percent and 7.9 percent, respectively.