Inflation to finally start slowing – poll
6.1-6.6% result seen for November, down from 2018 high of 6.7%
INFLATION likely slowed in November with economists polled by The Manila Times pointing to cheaper fuel and rice, among others, as having helped snap a 10-month run of elevated consumer prices.
Forecasts ranged from 6.1 percent to 6.6 percent, all lower than the nine-year high of 6.7 percent recorded in September and October but still well above the 2.0-4.0 percent target for 2018.
With consumer price growth having steadied, the Bangko Sentral ng Pilipinas (BSP) last week said it expected the November figure to settle within 5.8-6.5 percent. The Finance department has followed suit with a 6.3-percent forecast.
Official inflation data is scheduled to be released this Wednesday, November 5.
Projections
Land Bank of the Philippines market economist Guian Angelo Dumalagan had the highest forecast of 6.6 percent in the Times poll, citing lower fuel and rice prices and the peso’s recent appreciation.
“Falling yet still elevated domestic inflation, along with widespread views of more US rate hikes ahead, could prompt more hawkish moves from the BSP until next year,” he noted.
Analysts from the Asian Institute of Management (AIM) and Moody’s Analytics, meanwhile, said inflation likely slowed to 6.5 percent last month.
AIM Department of Economics associate professor Emmanuel Leyco pointed to hefty fuel price cuts but added that food prices overall could have continued to rise given the impact of recent typhoons.
Moody’s Analytics economist Katrina Ell also highlighted lower global oil prices and added that pressure for further Bangko Sentral ng Pilipinas (BSP) rate hikes would have eased.
“Emerging market volatility has cooled while inflation has passed its peak, giving the BSP some much needed breathing space heading into the new year,” she said.
Lower oil, fuel prices
Dubai crude prices have fallen week-on-week by nearly $4.00 per barrel, while Mean of Platts Singapore gasoline and diesel have also dropped by about $3.70 and $3.00 per barrel respectively, according to a November 21 Energy department report.
Local oil companies have cut pump prices for seven consecutive weeks, with diesel and gasoline now down by over P9 and P8 per liter, respectively, with another reduction of around P2/liter expected to be announced this week.
Higher fuel prices have been blamed for spurring inflation well past the 2.0-4-0 percent target, prompting monetary authorities to raise key interest rates five consecutive times for a total of 175 basis points (bps).
Meanwhile, HSBC analysts said inflation could have declined to 6.4 percent given administrative measures taken by the government to curb food prices.
“That said, we see continued upside risks to inflation in the near term, particularly in early 2019 as the second tranche of tax increases are scheduled to be implemented. We expect a 25-bp hike in first-quarter 2019, bringing the reverse repo (repurchase) rate to 5.00 percent,” they added.
DBS economist Masyita Crystallin offered a 6.3 percent forecast and also said: “I think inflation will ease next year, but might still stay above BSP upper limit of 4 percent.”
“[C]urrently I pencil in 4.7 percent [for] 2019 and … 3.8 percent in 2020,” she added.
ING Bank Manila, the University of Asia & the Pacific (UA&P), Metropolitan Bank & Trust Co. (Metrobank) and Nomura Securities Ltd. all believe November inflation rate fell to 6.2 percent.
ING Bank Manila senior economist Nicholas Antonio Mapa claimed that price pressures on the basket-heavy food component had eased substantially as supply conditions normalized.
“The continued slide in the inflation print shows that headline inflation will indeed display another humped shape curve (like 2008) given the supply side nature of the recent inflation blow up,” he added.
Rate hike pause
This development gives would give the doves in the BSP’s policymaking Monetary Board all the ammunition they need to call for a pause at a meeting later this month, Mapa continued.
UA&P economist Victor Abola, meanwhile, said the biggest fall in November inflation would be seen in transportation given an over 20-percent fall in crude oil prices.
Metrobank Research head Marc Bautista also highlighted lower commodity prices.
“We expect BSP to maintain rates especially if inflation surprises on the down side but there is always a risk of another rate hike to compress inflation and make it to come down faster,” he added.
Nomura’s Euben Paracuelles said the “significant drop from October reflects the sharp fall in retail fuel prices as well as rice prices finally declining.”
Bank of the Philippine Islands Vice-President and lead economist Emilio Neri Jr. had the lowest inflation forecast of 6.1 percent, which he pegged on a global oil price collapse from mid-October through mid-November.
“Improving supply side pressures in food also continued to ease, which combined with falling petroleum prices far outweigh the upward pressures exerted by the wage, transport fare and electricity prices,” he added.
Rice prices tagged
Finance Undersecretary Gil Beltran, meanwhile, attributed the department’s 6.3-percent projection to lower rice prices.
“Rice prices have gone down, also vegetables…,” he said, adding that “administrative measures that the President ordered in the third week of September are in effect already.”
That month, the government issued Administrative Order 13 that lifted non-tariff barriers and administrative restrictions on the importation of agricultural products.
Memorandum Order 26 was also released, directing the Trade and Agriculture departments to implement measures to reduce the gap between farmgate and retail prices.
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