Philippine Food Price and Inflation

• Decline in domestic price. As of June 2010, it was recorded that the domestic retail price of well-milled rice in the Philippines went down by 0.9% in local currency terms, because of existing rice price controls and the appreciation of the peso. This behaviour is very much different to that of other developing Asian countries where domestic rice and wheat prices are increasing due to rising international grain prices.
• CPI and inflation. Average food inflation is a large source of inflation in most regional economies because food carries a major weight in their consumer price index (CPI). As global food prices went up, so did the contribution of food to total inflation. However, although food is 46.58% of CPI in the Philippines, food did not drive inflation up because the increase in international rice prices was not transmitted to domestic prices.
• Near-term outlook. Tighter supplies of high quality wheat could lead consumers to substitute rice for the higher priced wheat, putting additional pressure on global rice prices. Nevertheless, these pressures could be somewhat tempered by the expected good harvest in and reduced imports by the Philippines this year.
• Projected GDP slowdown. If global food and oil prices both increase by 30%, GDP growth in the Philippines is estimated to slow down by 1.2 percentage points in 2011 and 0.9 percentage points in 2012 because the country is a large net importer of both food and Brent crude oil.
• Impact on Poverty. If food prices rise by 10%, 1.37 million Filipinos are projected to be pushed into poverty (a 1.6% increase). If food prices increase by 20%, 2.75 million Filipinos are projected to be pushed into poverty (a 3.2% increase). If food prices reach a 30% increase, 4.12 million Filipinos are projected to be pushed into poverty (a 4.9% increase).
• Current Measures. To address soaring food prices, the Philippines is currently trying to stabilize the situation by controlling rice prices through the National Food Authority (NFA) and by employing safety net programs like the rice price subsidy program.

Source:

Adriano, Lourdes et al, “Global Food Price Inflation and Developing Asia”, Mandaluyong City, Philippines: Asian Development Bank, 2011.