An impending El Niño, or dry spell, and the country’s power woes could cause inflation to accelerate in 2015, according to the National Economic and Development Authority (Neda).
Neda Director General and Socioeconomic Planning Secretary Arsenio M. Balisacan, however, said the government is aware of these risks, as well as other factors such as the exchange rate and adjustments in the United States monetary policy that could alter the low-inflation regime.
“The lingering possibility of El Niño occurrence in the first quarter of 2015 and power woes remain an overhanging concern and must be holistically addressed,” Balisacan said.
“Despite the expected monetary- policy adjustments in the US and the general concerns about the sustainability of growth in emerging economies, the peso is expected to remain relatively stable due to the country’s strong external position and will contribute to stable domestic prices going forward,” Balisacan, however, said.
Balisacan added that the favorable outlook on the production of agricultural commodities should further ease local price pressures in the coming months.
In January the country’s commodity prices continued to slide and began the new year with a growth of only 2.4 percent, according to the Philippine Statistics Authority (PSA).
This was slower than the 2.7 percent posted in December 2014 and the 4.2 percent posted in January 2014. Inflation in January 2015 was also the slowest since August 2013, when inflation was at 2.1 percent.
Balisacan said this is largely due to cheaper rice and oil prices. Rice prices, which account for 38 percent of total food inflation, eased on the back of ample supply.
“Although the prices of rice are still elevated, the rate of price increase was slower because of more favorable supply conditions. Total rice stock inventory continues to register a double-digit year-on-year growth as of December 2014. This is in contrast to the decline in inventory recorded prior to November 2014,” said Balisacan, who is also the Neda director general.
The shift in the rice harvest period from December 2014 to January 2015 in some provinces is seen to boost production in the first quarter of 2015.
“Reports also indicate that the National Food Authority will import an additional 600,000 tons of rice in the coming months to boost stocks in 2015,” the Neda said.
Balisacan also said significant rollbacks in the domestic pump prices of unleaded gasoline, diesel, kerosene and liquefied petroleum gas could contribute to the benign inflation regime.
Since the last quarter of 2014, international oil prices have slid remarkably due to rising global oil supply and sluggish oil demand due to the weak global recovery.
“The continuing decline in international oil prices is a positive development for the country considering our import dependence in oil,” Balisacan said. Another factor that caused the slowdown in inflation, he said, were electricity rates. This was caused by lower generation charges, improved power plant availability and lower cost of fuel.
The Neda stated that electricity charges were down anew by 17 percent year-on-year, or by P0.219 per kilowatt-hour.
Balisacan also stated that no major economic and weather shocks caused commodity prices to spike. He added that the lifting of the truck ban also eased inflation pressures.
“The lower inflation outturn in the first month of 2015 bodes well for consumption growth. It is aligned with market expectations given the consensus forecast of 2.4 percent for the same period. It is also within the medium-term inflation target set at 2 percent to 4 percent for the year by the Development Budget Coordination Committee,” Balisacan said.
The PSA said excluding selected food and energy items, core inflation further decelerated to 2.2 percent in January. It was noted 2.3 percent in the previous month and 3.2 percent in January 2014.
In NCR inflation eased to 1.5 percent in January. Its annual growth in December 2014 was 1.6 percent and 2.7 percent in January 2014.
Inflation in Areas Outside NCR continued to move at a slower pace of 2.7 percent in January. Inflation in December 2014 was pegged at 3 percent and in January 2013, 4.6 percent.