Petrol prices drive highest Philippine inflation in years

Manila, October 19, 2023: Inflation in the Philippines surged to a 44-month high of 7.8 percent in October, primarily due to soaring petrol prices stemming from the Middle East conflict, according to the government. Chief Philippine statistician Dennis Mapa announced the record-high inflation rate, surpassing analysts' forecast of 7.6 percent.

The main driver of the increase in October compared to September was a 20 percent rise in transport costs, Mapa explained during a news conference. The Middle East conflict significantly impacted the Philippines, which is heavily reliant on oil imports. The devaluation of the peso, coupled with the rise in transportation costs for commuters, affected various costs, including power generation and food transport.

This brought the inflation rate for the year to 5.6 percent, significantly above the government's target of 2-4 percent. Mapa cautioned about future risks, citing the El Nino dry spell affecting food supply and rising energy commodity prices. The central bank had already raised its key lending rate by 50 basis points to 5.50 percent two weeks prior, as it aimed to address broadening price pressures and further inflation risks.

President Ferdinand Marcos urged Filipinos not to panic, attributing the exchange rate woes to rising oil prices. While Manila lacked control over global oil prices, Marcos asserted that the country's foreign exchange reserves were healthy and the government had tools to defend the peso. Rising inflation has hampered the Philippine economy, which expanded by only 2.3 percent in the three months to June, the weakest growth since late 2009, excluding pandemic years. The next release of third-quarter gross domestic product growth is expected on Monday.