According to the Bangko Sentral ng Pilipinas (BSP) on Tuesday, November 6, the unchanged inflation print for the month — despite the growth of consumer goods’ prices remaining elevated in October — proves their assessment that price growth will start going down in the coming months.
BSP Governor Nestor A. Espenilla Jr. said the print supports their view that inflation pressures are finally moderating, following the Philippine Statistics Authority’s (PSA) announcement of an unchanged 6.7 percent inflation rate in October.
“It’s a significant deceleration, although the headline figure remains elevated. Second-round effects are also muted so far,” Espenilla said.
“That augurs well for a return to inflation target by 2019,” he added.
Backing up BSP’s assessment was ING Bank Manila senior economist Nicholas Mapa who said that the 6.7 percent print in October “validates the earlier expectation that inflation was close to or had peaked for the year and is now expected to taper off slowly going into the year-end.”
“Measures undertaken by the government to address supply chain bottlenecks appear to have found their way to tag prices, alleviating some pressure on food prices but inflation remains sticky given supply constraints,” he said.
“We hope nonmonetary-policy measures will continue to be deployed to help limit price gains ahead of the Christmas season. On risks to the upside, oil prices remain elevated despite trending lower in recent weeks while second-round effects are scheduled for November with minimum wages adjusted in the metropolis and transport fares increased,” he added.
However, other analysts warned of second-round inflation risks since the wage and fare hikes, as well as Typhoon Rosita’s impact, were not factored into the October inflation estimates.
Emilio S. Neri Jr., lead economist of the Bank of the Philippine Islands (BPI), said, “The 6.7-percent October inflation means the fourth quarter, not the third quarter, is the likely peak for quarterly inflation in 2018, as both November and December are likely to remain above 6-percent.”
Food supply stability
According to economic managers, more attention should be given to ensuring the stability of food supply, particularly rice, as it remains to be the major contributor to inflation.
“To compensate for the lost harvest in typhoon-affected areas, rice imports should be closely monitored to ensure that their arrival is timely and sufficient,” their joint statement read.
They also urged the Department of Agriculture to speed up distribution of seed buffer stocks for rice, corn and other buffer stocks in disaster-hit areas in time for the November-January planting season.
Their call to Congress to pass the amendments to the Agricultural Tariffication Act that would help lower rice prices by as much as P7 per kilogram was also reiterated.
“Setting our sights on longer horizons, more should be done to ensure price stability of food products. The government needs to pay closer attention to the agriculture and fisheries sector to significantly increase productivity and to be more competitive and resilient to weather-related and man-made shocks,” economic managers said.
‘Gov’t on the right track’
Presidential spokesperson Salvador Panelo said the Duterte administration’s actions have helped steady the rate of inflation in October that fell within the forecast of the BSP.
According to him, Duterte is apparently on the right track in mapping out efforts to reduce the prices of goods in the market.
At a regular press briefing in Malacañang yesterday, he said, “I think so, considering the directives of the president supplying us with food and other measures undertaken by the Department of Finance (DOF) as well as Agriculture and Trade, I think that contributes (to the steady prices of basic goods).”
Duterte also revamped the NFA to allow entry of imported rice, which economic managers earlier saw as a main contributor to the high monthly inflation, as reported by The Philippine Star.
Panelo is hopeful that the prices of commodities will remain steady in the run up to the Christmas season.
“Hopefully – it depends on global conditions. Of course, the government hopes that it will not go up and, hopefully, it should go down,” he said.