PSA: No downtrend yet as inflation still over 4 percent for 5 straight months | ABS-CBN

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PSA: No downtrend yet as inflation still over 4 percent for 5 straight months

PSA: No downtrend yet as inflation still over 4 percent for 5 straight months

Warren de Guzman and Edson Guido,

ABS-CBN News

 | 

Updated Jun 04, 2021 05:17 PM PHT

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A gasoline station employee attends to motorists as they gas up at a refueling station in Quezon City on July 20, 2020. Jonathan Cellona, ABS-CBN News

For three straight months, Philippine headline inflation has remained steady at 4.5 percent. The latest reading for May showed a slight easing in transport and food inflation was offset by higher utility prices and fuel costs. National Statistician Undersecretary Dennis Mapa noted some of the easing in transport inflation can be related to base effects, as transport costs spiked in May 2020 due to the impact of COVID-19 quarantines on public transport.

ABS-CBN Data Analytics, data from PSA

“Ang ating mga presyo sa bilihin, bigas, fruits and vegetables, negative din ang inflation. Ito ay nag-contribute sa downward inflation. Petroleum products, pataas. Ito ay nagkakaroon ng impact on ibang commodity groups. The trend is the same, we don’t see a downward movement. We saw a downward move in inflation for the bottom 30%, because the weight of food is bigger than (the) all income households [index]. So those are the factors. Petroleum would be part of the risk, because it would have an impact on other commodity groups,” Mapa said.

The Philippine Central Bank forecast May inflation to hit 4.4 percent, a tad below the actual result. But the May inflation rate was still within the BSP’s forecast range of 4 to 4.8 percent for the month.

Central Bank Governor Benjamin Diokno said: “The later outturn is consistent with expectations that inflation could remain above the high-end of the target range during the quarter as meat and oil prices remain elevated. Nonetheless, the BSP expects inflation to decelerate to within the target range by the second half of 2021 to 2022 as domestic supply bottlenecks are addressed.”

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The Central Bank’s preferred bandwidth for inflation is 2 to 4 percent. Diokno said the key to forcing inflation back within that range lies in government efforts to address the pork supply problem created by the African Swine Fever outbreak.

“The implementation of the temporary reduction in tariffs on imported pork is seen to address supply constraints and ease price pressures on meat products going forward. Thus the projected decline of inflation depends crucially on the timely arrival of pork to help stabilize domestic prices,” Diokno said.

ABS-CBN Data Analytics, data from PSA

Philippine meat inflation has remained high and has been in double-digit territory since December 2020 because of ASF. Negative inflation for vegetables and rice has helped offset this, with vegetable prices moving down sharply since February. Fish inflation has emerged as another problem. It accelerated to 7.8 percent in May from just 6 percent in April.

ABS-CBN Data Analytics, data from PSA

Meanwhile transport inflation declined as base effects helped slow tricycle fare inflation by nearly 10 percent, offsetting higher fuel costs. Food and transport inflation carry the biggest weights in the basket of goods the PSA monitors to measure inflation, and they both contributed to inflation holding steady in May.

ABS-CBN DATA ANALYTICS, DATA FROM PSA

Higher utility costs helped offset slight dips in food and transport inflation, alongside higher prices for restaurant prepared meals and miscellaneous services. Clothing, home maintenance work, and certain health services and products also saw accelerated inflation in May.

Mapa said they would be watching out for a few things this June, including the impact of unexpected rotational brownouts in Luzon, which is home to key industrial zones and consumption centers.

The impact of another slight easing in quarantine restrictions is another factor to be followed.

“Sa ngayon wala pang datos for presyo ng June. We will check if there is an adverse effect of the rotating brownout,” he said.

ABS-CBN DATA ANALYTICS

Inflation has surged in other major ASEAN economies including Singapore, Thailand, and Vietnam.

Philippine inflation has remained steady, albeit at a much higher rate compared to its ASEAN peers. Rising global fuel prices was one common factor for the region. Higher demand due to the easing of lockdown restrictions could be another driver.

Michael Ricafort, Chief Economist of the Rizal Commercial Banking Corporation’s Treasury Group, said aside from plans to lower import tariffs on pork and rice, there is another factor that would help keep Philippine inflation in check moving forward.

Ricafort said “the stronger peso exchange rate is among the strongest against the US dollar in more than 4.5 years, or since September 2016, and would help ease import prices and overall inflation. The peso appreciated by nearly P3 or about 6 percent compared to a year ago in May 2020.”

Diokno said the central bank would take all of this into consideration at the Philippine Monetary Board’s next policy meeting.

“The Monetary Board will consider the latest price developments during its meeting on 24 June 2021. The BSP remains watchful over the evolving economic conditions and challenges brought about by the pandemic to ensure that the monetary policy stance remains consistent with its price and financial stability objectives,” Diokno said.

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