Filipinos should brace for higher commodity prices this year based on National Economic and Development Authority (Neda) projection anticipating inflation averaging 3 percent.
Neda Director General and Socioeconomic Planning Secretary Ernesto M. Pernia said higher interest rates, oil prices and electricity costs were seen helping boost inflation to a higher path this year.
However, the projected path should still prove within the inflation target of 2 percent to 4 percent every year starting this year until 2020.
“[Inflation] might [average] around 3 percent [this year]. [This is because of] interest rates, rising interest rates, rising oil prices and electricity prices,” Pernia told reporters on Tuesday.
Pernia said that, while this should not have a significant impact on economic growth, the same could dampen the consumption of certain commodities.
He said this was an expected reaction of consumers with each increase in commodity prices and consequently, inflation.
“Consumer goods can probably less brisk with higher inflation,” Pernia said.
Pernia earlier said that, apart from these factors, typhoons Karen, Lawin and Nina could lead to faster inflation in the early months of the year.
Food accounts for around 30 percent of household consumption on average, but for poor households, this comprises about 70 percent of their expenses.
Pernia noted that rice comprises a sizable portion of the Consumer Price Index basket.
“The volatility in rice prices could affect the overall welfare of the Filipino families, particularly the poor who spend around 20 percent of their incomes on rice. Therefore, the government needs to promote more resilient practices for rice production to minimize the impacts of climate-related shocks,” he said.
Inflation last December lifted slightly to 2.6 percent from 2.5 percent in November, bringing full-year 2016 inflation to 1.8 percent.
The full-year inflation rate of 1.8 percent proved below the target range of 2 to 4 percent for the year, but higher than the 1.4 percent average rate in 2015.