Despite an expected onslaught of typhoons in the third quarter, the Philippine Statistics Authority (PSA) anticipates that consumer prices, particularly for rice, will continue to decline, but weather disturbances are expected to drive up vegetable costs.

“Certain items, such as vegetables, are expected to increase. Other items, like rice, will continue with negative inflation,” National Statistician and PSA Undersecretary Clair Dennis Mapa told Manila Bulletin on Thursday, July 24. 

Mapa pointed out that “typhoons usually cause increases in the price of agricultural commodities, particularly vegetables.”

This affects both the provinces in North Luzon that produce vegetables and the urban areas, such as Metro Manila and the CALABARZON region (comprising Cavite, Laguna, Batangas, Rizal, and Quezon), which rely on these supplies.

To recall, consumer prices rose slightly faster in June at 1.4 percent from May’s 1.3 percent—a five-and-a-half-year low—but a sharp drop in rice prices to their lowest since 1995 helped keep overall inflation in check. 

PSA data showed that rice prices had a steeper decline in June, falling by 14.3 percent, following a 12.8-percent drop in May.

Union Bank of the Philippines (UnionBank) Chief Economist Ruben Carlo O. Asuncion said that the series of typhoons expected from July to September “may exert upward pressure on consumer prices, particularly food and transport.” 

Oikonomia Advisory and Research Inc. Economist Reinielle Matt Erece also said that food prices are “the most affected by typhoons as supply may start to shrink due to affected agricultural output.” 

Sharing the same view as Asuncion and Erece, Philippine Institute for Development Studies (PIDS) Senior Research Fellow John Paolo Rivera noted that “disruptions to vegetable, rice, and fish supply chains due to flooding or transport bottlenecks could cause temporary spikes in food inflation, especially if back-to-back typhoons hit key agricultural provinces.” 

As such, Asuncion and Rivera have both projected a temporary inflation uptick in the third quarter. But Asuncion said this would depend “on the severity and duration of disruptions.” 

“Nonetheless, we expect inflation to normalize in the fourth quarter, keeping our full-year forecast at 1.8 percent, at the moment, barring any other major supply shocks,” Asuncion said. 

For Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael Ricafort, inflation will average at 1.5 percent in the current quarter, including all the possible typhoon damages on the agriculture sector. 

Jonathan Ravelas, senior adviser at Reyes Tacandong & Co., expects inflation to “creep up slightly” within the band of 1.4 percent to 1.8 percent.

While Mapa remains to have no gross domestic product (GDP) growth forecast for the third quarter, private sector economists expect the string of typhoons ravaging the Philippine archipelago to drag the country’s growth to as low as five percent, far below the government’s downscaled target of 5.5 percent to 6.5 percent. 

“Based on historical patterns and the impact of similar weather events last year, we anticipate a temporary slowdown in economic activity, particularly in agriculture, infrastructure, and government spending,” Asuncion said. 

Mapa affirmed this, saying that typhoons would have a negative impact in the short term, including “damages in properties, especially in the agriculture sector.”

Asuncion said his working forecast for the third quarter period is “around five percent, reflecting the anticipated disruptions.” Growth clocked in at 5.4 percent in the first quarter, modestly faster than the previous quarter but significantly slower than the 5.7 percent growth rate in the same period last year. 

Rivera said the series of typhoons expected in the third quarter “could temporarily dampen GDP growth, particularly through agriculture, infrastructure damage, and supply chain disruptions.” 

“Rural output and mobility usually take a hit, which affects farm-to-market logistics, construction activity, and even retail in hard-hit areas. This may slightly pull down quarter-three GDP growth, especially if typhoon damage is widespread and recovery spending is delayed,” Rivera added. 

As such, he provided a forecast range of 5.3 percent to 5.5 percent, noting that this could move at a more sluggish rate “if climate impacts escalate.” Ricafort expects the local economy to expand by 5.4 percent, within Rivera’s forecast range. Ravelas also sees growth falling short of six percent.  

“Nonetheless, we expect a recovery in the fourth quarter, with growth potentially reaching 5.6 percent, keeping the full-year average at 5.3 percent,” Asuncion said.