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Philippines inflation has become a test case for how rapidly an external supply shock can propagate through a domestic food system. The April print was a material upside surprise. Headline inflation rose to 7.2% from 4.1% in March, and the miss was not confined to fuel. By the time the data landed, the shock had already spread into core parts of the household basket.

Transport inflation rose to 21.4% from 9.9%. Housing, water, electricity, gas and other fuels rose to 8.2% from 4.7%. Food and non-alcoholic beverages rose to 6.0% from 2.9%. Rice inflation rose to 13.7% from 3.5%.

Rice occupies an unusually large weight in the Philippine consumption basket. OCBC estimates that rice accounts for 8.9% of the CPI, the highest among the ASEAN markets in its comparison set. That structural feature means a rice price shock can move headline inflation far more than it would in economies where rice carries a smaller consumption weight.

Domestic price data confirm that the pressure was already building before the April print. PSA reported that well-milled rice rose to ₱58.88 per kilogram in the second phase of April, from ₱58.34 in the first phase of April and ₱56.60 in the second phase of March. Regular-milled rice also rose to ₱51.11 per kilogram in early April, from ₱48.69 in the second half of March and ₱47.47 in early March. These are sequential increases across every reporting window.

The input cost shock is equally visible at the global level. Brent rose above $100/barrel in March. Fertilizer prices jumped 26.2% in the month, led by a 53.7% rise in urea. The price of urea in Eastern Europe rose to $725.6 per metric ton in March, from $472.0 in February and $415.4 in January.

The exchange rate adds another layer to the same story. The Philippines relies on imported energy, imported fertilizer inputs and imported rice to supplement domestic supply. When the peso weakens, the domestic cost of those imports rises even if dollar prices are unchanged. A higher USD/PHP rate therefore amplifies the local-currency impact of global commodity shocks (Figure 1). Rice, fuel, freight and fertilizer are all affected by the same currency channel.

Figure 1

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