By Chino Leyco and Lee Chipongian
The rate of increase in consumer prices further slowed for the fifth straight month in March as costs of food as well as beverages continued to drop from its highest levels last year, the Philippine Statistics Authority (PSA) reported Friday.
Based on the PSA report, the country’s headline inflation clocked in at 3.3 percent last month, weaker than the 3.8 percent in February and significantly slower compared with 4.3 percent in the same period last year.
The March inflation rate is the lowest since the 2.7 percent level registered in December, 2017, and well within the Bangko Sentral ng Pilipinas’ (BSP) forecast for the month of 3.1 percent to 3.9 percent.
Last month’s 3.8 percent inflation rate was well within the Duterte administration’s target for 2019 of 3.0 percent to 4.0 percent.
“The downtrend was primarily due to slower annual increase in the index of the heavily-weighted food and non-alcoholic beverages at 3.4 percent,” PSA said.
The Bangko Sentral ng Pilipinas (BSP) said that inflation expectations are becoming firmer but upside pressures still loom from a possible lengthy El Niño warm weather and volatile oil prices.
“The possibility of a stronger and prolonged El Niño episode together with the continued rise in global crude oil prices provide upside price pressures over the near term,” the BSP said in a statement Friday following PSA’s announcement.
The BSP Department of Research had projected a 3.1-3.9 percent range for March inflation. In February, actual inflation slipped to 3.8 percent from 4.4 percent in January. With March’s 3.3 percent inflation, the year-to-date average is 3.8 percent.
BSP Deputy Governor Diwa C. Guinigundo said the latest inflation outturn is “very much consistent” with the BSP’s forecast for March. The actual number “confirms the BSP’s view that inflation will sustain the downtrend for the rest of the year.”
“Month on month, price movement is zero with seasonal factors but deseasonalized series shows 0.1 percent, all indicative of the disinflationary process we are witnessing today. Core inflation as a measure of underlying demand pressure has also slowed down,” Guinigundo explained.
The year-to-date average of 3.8 percent is already within the BSP’s two-four percent inflation target, he added.
The BSP has lowered its 2019 inflation forecast to three percent as of March 21, from the previous estimate of 3.1 percent announced last February 7. The 2020 inflation forecast is also three percent.
Within target inflation
In March, inflation of alcoholic beverages and tobacco was seen at 10.8 percent; while housing, water, electricity, gas, and other fuels and furnishing, household equipment and routine maintenance of the house, both at 3.4 percent.
Health registered a 3.9 percent inflation rate last month, while communication at 0.3 percent; and restaurant, miscellaneous goods and services at 3.7 percent.
Excluding selected food and energy items, core inflation slid further to 3.5 percent from 3.9 percent in March.
Meanwhile, inflation of corn dropped further by 2.4 percent, while slowdowns in the annual increments were also recorded in rice (1.4 percent), fish (4.8 percent), oils and fats (3.8 percent), fruits (1.7 percent), vegetables (4.0 percent); and sugar, jam, retained honey, chocolate and confectionary (7.1 percent).
In Metro Manila, inflation decelerated further to 3.2 percent from 3.8 percent and 5.2 percent in the same month last year.
In areas outside the National Capital Region, they also posted slower inflation at 3.4 percent, down from 3.8 percent in the previous month, and 4.1 percent in March 2018.
Nicholas Mapa, ING Bank senior economist, said inflation continued to slide with the basket-heavy food subsector weighing on the headline number as supply conditions normalize.
“With supply chains normalizing, the 2018 inflation pop has faded very quickly with inflation now firmly within target to help solidify expectations for within-target inflation for this year and next,” Mapa said.
“With inflation continuing to print within target and with BSP forecasts showing inflation will likely settle right at the 3.0 percent for both 2019 and 2020, we continue to believe that the door to ease monetary policy remains wide open,” he added.
Mapa noted that risks to the inflation outlook remain, including the threat of oil price spikes and El Niño crop damage.
Palace is pleased
Meanwhile, Presidential Spokesperson Salvador Panelo said government is pleased with the further deceleration of the inflation rate as a result of the government’s efforts.
“We are confident that this slide would continue further for the rest of the year as President Rodrigo Roa Duterte’s signing of Republic Act (RA) No. 11203 last February is expected to further ease inflation. Our economic managers expect rice prices to go down and even cut inflation by 0.5 to 0.7 percentage point this year,” Panelo said in a statement.
The Rice Tariffication Act (RA 11203) seeks to remove the quantitative restrictions on rice imports to allow private merchants to bring in rice from other countries.
“The Government, however, would not be complacent and has been vigilant in keeping a close watch on the prices of goods and commodities with the onslaught of El Niño, which may hamper food production,” he said. (With a report from Argyll Cyrus B. Geducos)