Seven percent inflation in the Philippines could be around the corner.
More than half a million metric tons of paddy rice were wiped out by Super Typhoon Mangkhut last weekend, adding pressure to rice prices which are already at a record. Michael Enriquez, chief investment officer at Sun Life of Canada Philippines, Inc., forecast inflation of as high as 7 percent in September, from 6.4 percent last month, which was the fastest pace since 2009.
“There’s a strong possibility inflation will hit that high,” Enriquez said. “Even before the storm, prices have been moving higher, especially for rice and oil.”
The typhoon couldn’t have come at a worse time for the Philippines, with soaring inflation and a currency slump of more than 7 percent against the dollar this year prompting the central bank to hike interest rates by 100 basis points since May.
Pressure started at the beginning of the year with higher oil prices and tax increases on fuel and quickly moved to rice because of supply shortages. Rice is the staple food in the country and is the second-largest item in the consumer basket.
The agriculture department estimated that 558,441 metric tons or 11.45 billion pesos ($212 million) worth of rice ready for harvest have been lost, while other crops like corn were also destroyed.
ING Groep NV warned that rice prices, which have risen more than 20 percent this year, will soar even more. Inflation may be higher than 6.5 percent in September, Nicholas Mapa, senior economist said in a note Wednesday. The September data is scheduled to be released Oct. 5.
Government officials are rushing to implement measures which include easing importation of rice and sugar, but the impact on prices may only start after October, Sun Life’s Enriquez said.
Inflation will peak this quarter and start easing in the next few months, central bank Deputy Governor Diwa Guinigundo said this week. Bangko Sentral ng Pilipinas has pledged to deliver strong action at its Sept. 27 policy meeting.
The typhoon’s blow on food supply is happening at a time when oil is anticipated to go up and inflation pressure will probably last even beyond September, said Rachelle Cruz, an analyst at AP Securities, Inc. in Manila. (Bloomberg)