‘Taal eruption could raise commodity prices in Q1’
Credit to Author: Mayvelin U. Caraballo, TMT| Date: Thu, 30 Jan 2020 16:21:16 +0000
THE impact of the Taal Volcano eruption earlier this month on the agriculture sector in Region 4A could push commodity prices higher in the first three months of the year, the Bangko Sentral ng Pilipinas (BSP) said on Thursday.
In a press chat at the central bank’s headquarters in Manila, BSP Governor Benjamin Diokno told reporters that “as with prior episodes of volcanic eruptions in the country, inflation could show a slight uptick in the coming months.”
The January 12 eruption, he said, could also exert some upside pressures on inflation, because of the calamity’s impact on the supply of food items, including coffee, cacao, pineapple, fruits and vegetables, rice, and coconut.
The fisheries sector appears to be particularly vulnerable, with fish cages around Taal Lake for tilapia and bangus (milkfish) reported to be severely affected, he added.
“Nevertheless, the increase is likely to be temporary, with price pressures easing in the following months.”
That said, the central bank chief assured that monetary authorities “will continue to monitor these developments as we prepare our forecasts for our review of the monetary policy stance.”
The BSP’s policy-making Monetary Board will hold its first rate-setting meeting this year on February 6.
The Bangko Sentral expects consumer price growth to stay on course in 2020, with its latest projections showing that headline inflation is likely to remain within the government’s target range of 2 to 4 percent.
For both 2020 and 2021, it sees inflation averaging near the midpoint of the target band at 2.9 percent.
“Based on the central bank’s analysis in December 2019, the balance of risks to the inflation outlook continues to lean slightly toward the upside in 2020 and toward the downside in 2021,” the BSP said.
Upside risks, it added, could come from the increased volatility in international oil prices amid heightened geopolitical tensions in the Middle East, the potential impact of the African Swine fever outbreak late last year, and recent weather disturbances on domestic food prices.
Meanwhile, amid slower global economic growth, uncertainty over trade policies in major economies could weigh down on world economic activity, and thus mitigate upward pressures on commodity prices, the Bangko Sentral said.
In 2019, inflation averaged at 2.5 percent.