THE country’s headline inflation may be easing, but analysts warned that the slowdown remains fragile as elevated rice prices and a weakening peso threaten to keep price pressures high in the coming months.
On Friday, the Philippine Statistics Authority (PSA) reported that inflation eased to 6.1 percent in August from 6.2 percent in July.
This marked the fourth straight month of slower inflation after it peaked at 7.2 percent in April. Average inflation from January to August stood at 5.2 percent.
Despite the slowdown, inflation remains well above the Bangko Sentral ng Pilipinas’ (BSP) target range of 2 to 4 percent.
PSA noted that rice remained the biggest individual contributor to August inflation, with its inflation rate accelerating to 19.4 percent from 17.1 percent in July. Rice alone contributed 1.3 percentage points to headline inflation.
This was the highest rice inflation since July 2024, when it reached 20.9 percent.
Ateneo de Manila University economist Leonardo A. Lanzona said the latest figures suggest that the easing in headline inflation is being driven by a few softer components rather than a broad-based moderation in price pressures.
‘I would not yet call this an established trend-it’s a lull that could reverse quickly if either rice supply or the peso deteriorates further,’ Lanzona told the BusinessMirror.
Lanzona said rice remained a significant risk to the inflation outlook given its large weight in the consumer price index (CPI) basket, with sustained double-digit inflation in the staple potentially reversing the broader downward trend.
Food, fuel pressures
Data from PSA showed that food and non-alcoholic beverages remained a major source of inflationary pressure in August, accounting for 28.8 percent of headline inflation.
While some food prices eased, rice and other items continued to post elevated inflation.
Vegetable and tuber prices fell -3.4 percent in August after rising 8.4 percent in July, while fish and other seafood inflation slowed to 6.6 percent from 7.8 percent. At the same time, inflation in cereals and cereal products reached 14.9 percent, while fruits and nuts rose 5.8 percent.
The food pressures were accompanied by higher transport costs. Transport inflation accelerated to 13.5 percent in August from 11.9 percent in July, while housing, water, electricity, gas and other fuels eased to 7.9 percent from 8.2 percent.
Lanzona said weakness in the peso could further compound inflationary pressures, particularly through fuel prices.
Because the Philippines imports much of its refined fuel, a weaker peso can raise the local cost of imported fuel and feed into transport prices, farm production costs, and eventually food prices.
‘Further peso weakness would show up in headline CPI almost immediately via transport and with a short lag via food,’ he added.
Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco likewise pointed to persistent global oil price pressures as a risk to the inflation outlook.
‘Oil-related disinflation in the housing and utilities, and transport components is still likely to be the over-arching story until the next of next year, given their excessive overshoot when the conflict started,’ Chanco said.
Bad weather, El Niño
Bank of the Philippine Islands (BPI) Lead Economist Emilio S. Neri Jr. said the August inflation reading may not yet fully capture the impact of recent bad weather and flooding, which could add to price pressures in the months ahead.
‘The latest inflation figure may also not yet fully reflect the impact of the recent weather and flooding, the effects of which could materialize in the coming months,’ Neri said.
National Statistician Claire Dennis S. Mapa earlier said PSA’s provincial offices had reported price pressures toward the end of August, particularly in the final week, which could be reflected in succeeding inflation prints.
Neri also identified the potential emergence of a super El Niño as a major risk to the inflation outlook.
He said its full impact may emerge in the first quarter of 2027, with food prices particularly vulnerable to disruptions in supply.
‘Rice prices are particularly sensitive to adverse weather conditions, and rising fertilizer costs could further amplify the effect of poor weather on food supply by raising farmers’ production costs,’ he said.
Socioeconomic Planning Secretary Arsenio M. Balisacan, for his part, said the Department of Agriculture continues to update its El Niño response plan, including irrigation support, farm input assistance, inventory monitoring, and timely market interventions to help stabilize food prices.
‘Our priority is to strengthen the foundations of long-term price stability through improved food security, more efficient logistics, and targeted support for vulnerable sectors,’ Balisacan said.