The Bangko Sentral ng Pilipinas (BSP) has adequate room to maintain the low interest rate environment despite the uptick in inflation last October, the Department of Finance (DOF) said.
In an economic bulletin, Finance Undersecretary Gil S. Beltran, said the higher inflation last month was mainly driven by base effects as well as the increase in prices of fish and meat due to importation restrictions and the African swine fever (ASF).
Comparatively, inflation rate in October last year was 0.83 percent, a record-low since May 2016, as against 2.5 percent last month.
“Fish was adversely affected by the reimposition of restrictions on fish imports and meat, by the continuing impact of the African swine fever,” Beltran said in his report to Finance Secretary Carlos G. Dominguez III.
Despite the slight increase from September’s 2.32 percent, Beltran noted that the average inflation in the first nine-months of the year was only 2.5 percent, or at the lower end of the 2.0 percent to 4.0 percent goal for 2020.
“Stable inflation will continue to provide adequate room for low interest rates to support economic recovery as the country transitions to the new normal,” the finance official said.
Meanwhile, Acting Socioeconomic Planning Secretary Karl Kendrick T. Chua said that while upside risks such as the adverse impact of inclement weather and the lingering presence of the ASF remain, inflation continued to settle within target in October.
“Aside from the ongoing pandemic, the country has been facing adverse weather conditions in the recent months. Effects of typhoons and La Niña on the agriculture sector and food prices pose upside risks to inflation,” Chua said.
Latest projections from the Department of Agriculture showed the supply of key food products is likely to remain sufficient until the end of the year. However, agricultural damage may put food supply at risk, and thus put pressure on prices.
“A key strategy for food security and food price stability during uncertain times is to prolong the shelf life of agricultural goods. This may come by way of introducing proper technology and increasing investments in warehouses and cold storage facilities in strategic locations,” Chua said.
He also emphasized the need for the government and the private sector to tap local producers in nearby provinces or regions to make up for the lost harvest in disaster-stricken areas.
“Relief efforts in heavily affected areas are being prioritized. NEDA [National Economic and Development Authority], meanwhile, has been participating in post-disaster needs assessment led by the Office of Civil Defense,” Chua said.
“We will provide an analysis of the effects of the disasters on various sectors, including macroeconomic impact,” he added.
Furthermore, Chua said that support to the agriculture sector is also needed due to the continued presence of ASF in the country, which has resulted in tighter supply and higher prices of pork in Luzon.
“The government will strictly implement biosecurity measures and food safety protocols to curb the spread of animal diseases in farms and guarantee safe consumption of meat products,” Chua said.