The National Economic and Development Authority (Neda) on Tuesday raised the alarm that, while for the moment inflation remains low, the El Niño phenomenon could upset the carefully calibrated macroeconomic numbers and drive commodity prices higher.
Cheaper food and fuel, as well as lower electricity prices, caused the country’s inflation to slow to 2.2 percent in April, the slowest since August 2013, when this averaged 2.1 percent.
Neda Officer in Charge and Deputy Director General for Planning Emmanuel F. Esguerra said prices could increase anew if the government does not implement measures to ensure ample food supply.
“Timely importation of rice to augment domestic supply should serve as a ready measure to prevent the repeat of the high rice prices witnessed in the third quarter of 2013 until 2014,” Esguerra said.
“There should be programs to cover the use of appropriate technology to expand production capacity, as well as intensification of credit programs and facilities with crop insurance,” he said.
Esguerra also said the government must continue efforts to decongest Metro Manila to avoid future disruptions in the domestic-supply chain.
As a consequence, the Bangko Sentral ng Pilipinas (BSP) was seen keeping the policy rates unchanged at the scheduled rate-setting meeting of the Monetary Board (MB) next week, as the low inflation print in April helped make that decision highly likely.
The Bangko Sentral ng Pilipinas (BSP) was seen keeping the policy rates unchanged at the scheduled rate-setting meeting of the MB next week, as the low inflation print in April helped make that decision highly likely.
The inflation rate in April was also within the forecast, ranging from 1.9 percent to 2.8 percent, earlier announced by the Bangko Sentral ng Pilipinas. This was also lower than consensus forecast by private economists surveyed by the BusinessMirror, averaging 2.4 percent.
At present, the BSP borrows from and lends to banks at 4 percent and 6 percent, respectively. The rates have been in place since September last year.
While headline inflation is still within the target of 2 percent to 4 percent, BSP Deputy Governor for the Monetary Stability Sector Diwa C. Guinigundo said the likelihood for inflation lower than 2 percent in the coming months could come to pass if the trend continues.
Guinigundo reiterated inflation this year should definitely average within target.
Inflation started to tick up as high as 4.9 percent in May up to August last year.
No matter the benign outlook to inflation, however, Tetangco said the MB remains on the alert against risks that could threaten the stability of the economy.
“We will nevertheless remain watchful of developments, especially the Fed actions and global market interpretation of such actions, how the interaction of these two factors are absorbed by our own financial markets; and how domestic economic agents use these to shape their inflation expectations,” Tetangco said on Tuesday in a text message to reporters.
It was noted that congestion at the Port of Manila last year significantly affected not just the country’s export and import growth but food prices, as well.
In April the Neda said food inflation slowed to 4 percent in April 2015. The Neda said the slowdown in food inflation may be attributed to slower price adjustments in rice, meat and fruits.