The average headline inflation rate in the Philippines for 2012 posted a much lower figure compared to the rate recorded in 2011, reaching the 3 percent to 5 percent range of the Bangko Sentral ng Pilipinas (BSP).

Data from the National Statistics Office showed on Friday that the annual average headline inflation rate for full-year 2012 went down to 3.2 percent from 4.6 percent in 2011.

“The risks to inflation over the policy horizon remain fairly balanced. This, together with the expectation that real gross domestic product growth would continue to be strong suggests our currency policy settings are appropriate. Nevertheless, we are watchful of global developments that may affect domestic growth dynamics and inflation outlook,” said BSP Gov. Amando Tetangco Jr.

In December, inflation rate inched up to 2.9 percent from 2.8 percent in November from the effects of higher annual rates in the food and nonalcoholic beverages, alcoholic beverages and tobacco indices.

The Statistics office data showed that excluding selected food and energy items, core inflation eased to 3.3 percent in December from 3.4 percent in November, while the annual average core inflation rate slowed to 3.7 percent in 2012 from 4.3 percent in 2011.

On a monthly basis, consumer prices moved by -0.1 percent in December from 0.1 percent growth in November, because of the decreases in the prices of food items such as vegetables, cooking oil and sugar.

The data also noted the lower charges in electricity rates and price rollbacks in liquefied petroleum gas and kerosene in selected regions during the month.

By commodity group, the annual adjustment in the heavily weighted food and nonalcoholic beverages index at the national level rose 2.3 percent in December from 2.2 percent in November and alcoholic beverages and tobacco index, 5.1 percent from 5.0 percent.

It also stated that the annual hike in clothing and footwear index slowed down to 4.9 percent; housing, water, electricity, gas and other fuels index, 3.6 percent; and transport index, 1.2 percent, while the rest of the commodity groups retained their last month’s rate.

In Metro Manila, annual inflation rose to 2.8 percent in December from 2.6 percent in November as higher annual growths were posted in the indices of food and nonalcoholic beverages; alcoholic beverages and tobacco; housing, water, electricity, gas and other fuels; health, communication; and recreation and culture.

Statistics data added that the yearly average inflation rate in the area declined to 2.9 percent
in 2012 from 4 percent in 2011.

Meanwhile, annual inflation in areas outside Metro Manila was pegged at 2.9 percent in December, the same rate in November.

The indices of clothing and footwear, health, communication, education and restaurant and miscellaneous goods and services retained their last month’s rate.  

Within target
The 3.2-percent inflation rate for 2012 marks the fourth consecutive year that the central bank was able to keep inflation within the government’s target range.

In December, Tetangco said that there is a possibility that the 2012 inflation might be at the lower end of the range because of slower increases in food prices, especially from vegetables. The dip in oil prices may have also helped temper inflation for the month.

“We would continue to review our policy rate settings, to see if there is a need to put in place other macro-prudential measures to ensure price and financial stability,” he added.

Earlier, Tetangco said that the Development Budget Coordination Committee, decided to maintain the current inflation target at four percent, plus or minus 1 percent, for 2013 to 2014 and reduce the inflation target for 2015 to 2016 to 3 percent, plus or minus 1 percent.

“The most recent assessment of current and prospective trends indicates a favorable outlook over the medium term. The current four percent, plus or minus 1 percent, fixed annual target for 2013 to 2014 of the government remains suitable to the Philippine economy. This target is consistent with the country’s sustained economic growth objectives, favorable inflation forecasts and benign inflation expectations,” he said.

The announcement of the inflation target is in line with the BSP’s commitment to greater transparency and accountability in its conduct of monetary policy.

Tetangco said that the central bank will continue to monitor closely the evolving balance of risks to both inflation and output to ensure that monetary conditions remain in line with price stability, while supportive of sustained economic growth.