Economist forecasts slower inflation

“The Philippines will benefit from favorable base effects going into December,” Mapa said. (Pixabay photo)

MANILA — An economist of ING Bank NV Manila said the spike in inflation is likely to taper off by end-2018 partly because of government efforts to address the food supply issue, which contributed substantially to the abnormal rate of price increases in recent months.

In a report, ING Bank NV Manila economist Nicholas Mapa said the 6.7-percent inflation rate last September is in line with their forecast that inflation “is close to or has peaked for the year and is expected to taper off going into the year end.

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Inflation rate last month was higher than the 6.4 percent in the previous month and brought the year-to-date average to 5 percent.

The government’s target is between 2 percent and 4 percent for 2018-2020.

“The Philippines will benefit from favorable base effects going into December,” Mapa said.

He added that rice contracted for importation has arrived and is already being distributed “with up to 750,000 metric tons (MT) seen to arrive in the coming weeks to help alleviate pressures further.”

Malacañang has issued several memoranda to ensure an adequate supply of rice and other food commodities, which are among the reasons for the elevated inflation in the past months.

Memorandum Order (MO) No. 27 directs the Department of Agriculture, Department of the Interior and Local Government, and the Metropolitan Manila Development Authority to ensure the efficient and seamless delivery of imported agricultural and fishery products from ports to markets.

Also, MO 28 was issued ordering the National Food Authority for the immediate release of about 230,000 MT of rice in its warehouses nationwide and the immediate distribution of 100,000 MT of rice that has been contracted and was expected to be delivered by end-September.

These measures are on top of the 150 basis points increase in the Bangko Sentral ng Pilipinas’ (BSP) key policy rates that are targeted to anchor inflation expectations and ensure price stability.

“We hope further non-monetary policy measures begin to take root ahead of the Christmas season,” Mapa said.

He, however, said that oil prices remain high and remain the upside risk to inflation.
Increases in the price of oil in the international market are among the major contributors to the rise in domestic inflation.

To date, the global price of oil is about USD80 per barrel, up from only about USD60 per barrel. With oil prices still high, Mapa said the BSP “remains vigilant against any signs of second-round effects and will look to anchor inflation expectations going forward.”

“This diminishes to some extent the likelihood of a 25 bp rate hike in November, as BSP keeps the powder dry for further action, if warranted, should the peso continue to slide,” he added.