Inflation eases to 3.0% in April
Credit to Author: ANNA LEAH E. GONZALES| Date: Tue, 07 May 2019 16:32:48 +0000
THE slower increase in the prices of food and non-alcoholic beverages caused the Philippines’ headline inflation to slow further to 3.0 percent in April, the lowest recorded in 16 months, the Philippine Statistics Authority (PSA) reported on Tuesday.
In a briefing, the state-run statistics agency said the rate of the increase in the prices of goods and services was lower than March’s 3.3 percent and year-ago’s 4.5 percent.
The April rate falls within the 2.7 percent-to-3.5 percent range of the Bangko Sentral ng Pilipinas (BSP) and the 2.9 percent-to-3.3 percent forecast of analysts polled by The Manila Times.
Last month’s inflation was the lowest since the 2.9 percent posted in December 2017 and a continuation of a downward trend, now on its sixth straight month.
Core inflation settled at 3.4 percent in the month, lower than March’s 3.5 percent.
“Main drivers in the downtrend of inflation in April 2019 were food and non-alcoholic beverages (3.0 percent); alcoholic beverages and tobacco (9.9 percent); and housing, water, electricity, gas, and other fuels (3.2 percent),” PSA Assistant Secretary Josie Perez said in the briefing.
Month-on-month, consumer prices rose by 0.2 percent last month from 0.1 percent in March.
Malacañang praised the inflation results, with spokesman Salvador Panelo saying President Rodrigo Duterte’s strong political will and decisive action, as well as “competence,” were the main reason for its continued easing.
“Much has been said about the economic policies of the Chief Executive,” Panelo said. “The current disinflation proves [Duterte’s] competence in managing our country’s economy while it disproves those who criticize him for overfocusing on our nation’s peace-and-order situation.”
According to the spokesman, the government is confident that inflation would continue to slow until the end of the year following the signing of Republic Act 11203, or the Rice Tariffication Law.
This law provides for the removal of import restrictions on rice with tariffs; lifting of quantitative restrictions; and allowing the National Food Authority to procure its buffer stock from the country’s farmers.
‘Buoyant economic growth’
Socioeconomic Planning Secretary Ernesto M. Pernia, meanwhile, said in a statement that “the recent inflation reading validates our efforts toward stabilizing inflation, so that the country’s buoyant economic growth, along with key reforms, remains unimpeded.”
He warned, however, that the government should remain watchful of upside risks to inflation, such as the ongoing El Niño weather phenomenon, possible increase in utility rates and volatility in international oil prices.
“Given unstable global oil prices, the government should prioritize rolling out the second tranche of its social mitigating measures under the Train law, such as the unconditional cash transfer and Pantawid Pasada, especially now that the 2019 national budget has already been signed into law,” the National Economic and Development Authority chief said.
BSP Governor Benjamin Diokno shared Pernia’s view, saying in a statement that rising global oil prices and a prolonged, El Niño-caused drought “could be a source of upside price pressures over the near term.”
“On the other hand, the weakening global economic environment could present downside risks to inflation,” he added.
Despite these, the central bank chief assured that “the BSP continues to keep a close watch over price developments in the country and shall consider all relevant data at its next monetary policy meeting on 9 May 2019 to ensure that the monetary policy stance remains consistent with the BSP’s primary mandate of price stability conducive to a balanced and sustainable growth of the economy.”
For his part, Trade Secretary Ramon Lopez called last month’s rate “excellent.”
“This is expected, as we are seeing prices of major commodities like rice, fish, meat and vegetables to go down with better supply in the market,” he told The Manila Times.
The Philippine Chamber of Commerce and Industry also lauded last month’s inflation, with its president Alegria Limjoco telling The Times that the “business sector can feel the improvement.”
Rate cuts likely
The inflation results also cemented analysts’ view that monetary authorities are likely to cut interest rates when they meet on Thursday.
“We believe the time is ripe for the BSP to begin monetary loosening, given prevailing economic conditions and the lagged impact of monetary policy on the real economy,” HSBC economist Noelan Arbis said.
ANZ Research economists Mustafa Arif and Sanjay Mathur acknowledged the concern over the recent rise in global crude oil prices, but nonetheless expects the central bank “to take a holistic view by also considering offsetting developments such as easing food prices and core inflation.”
“With the inflation objective in hand and growth seem to take a hit in [the first half], it would be about time for BSP to ease off the brakes from ‘crisis mode’ and finally nudge on the accelerator to zoom to faster growth,” ING Bank Manila senior economist Antonio Mapa said.
WITH RALPH EDWIN U. VILLANUEVA, MAYVELIN U. CARABALLO AND TYRONE C. PIAD
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