By Bianca Cuaresma & Cai Ordinario
The National Economic and Development Authority (Neda) urged the government to “err on the high side” by importing food items to keep prices stable next year.
Neda Deputy Director General Rolando G. Tungpalan said importing additional rice and other food items can help prevent food- price spikes.
“The government should err on the high side in determining food-import requirements in anticipation of El Niño to avoid food- price spikes, which would be very detrimental to the poor, who spend over 60 percent of their budget on food,” Tungpalan said.
He added that the faster implementation of the Roadmap to Address the Impact of El Niño (Rain) will soften its adverse impact on food prices.
The national government recently decided to scale down its additional rice importation for the second quarter of 2016 due to an increase in planting intentions among farmers.
The government already expects the arrival of 500,000 metric tons (MT) of rice in the first quarter. However, the extent of the El Niño and the recent onslaught of Typhoon Lando in the country’s rice bowl forced the El Niño task force to recommend additional rice imports.
Initially, before Typhoon Lando, the task force headed by the Neda recommended the importation of an additional 1 million metric tons (MMT) in the second quarter.
However, due to Lando and its destruction of rice lands in Central Luzon, the task force was forced to increase its recommendation to 1.3 MMT on top of the 500,000 MT expected to arrive next quarter.
Tungpalan added that the government should address the unstable energy situation in Mindanao, given its large dependence on hydropower plants.
“There is a need to reinforce measures to expand investments in the rehabilitation program for existing hydropower plants so as to increase their generation capacities,” Tungpalan said.
“The government should also start preparing for the possible impact of La Niña, which could be a strong one, as well. The current drier than normal conditions must be taken advantage of to build flood mitigation infrastructures,” he concluded.
No rate tweaks
The Bangko Sentral ng Pilipinas (BSP) has virtually dismissed any possibility to adjust policy rates in its last meeting for the year, as the Monetary Board (MB) shifts its focus on the medium-term inflation after the growth of consumer prices finally picked up in November.
Central bank Governor Amando M. Tetangco Jr. said that, as widely expected by the MB and economists, the inflation uptick in November proves that current monetary-policy settings are still appropriate and do not need adjusting.
“As anticipated, inflation had bottomed out in October. With credit and domestic liquidity growth rates also stabilizing, these signal that our stance of policy right now is appropriate,” Tetangco told reporters on Friday.
The Philippine Statistics Authority (PSA) reported on Friday that inflation hit 1.1 percent, accelerating from the 0.4-percent inflation in October. This is the first time that inflation accelerated since February this year.
This is also the highest inflation since June this year, when it hit 1.2 percent. The November inflation also brought the average inflation for the entire 11-month period of the year to 1.4 percent, still below the central bank’s target range of 2 percent to 4 percent for the year.
Thus, with the governor’s statement that the current stance is appropriate, given the latest development on inflation, the BSP is likely to hold rates in its December 17 meeting and into 2016, even if the US Federal Reserve (the Fed) is looking to hike in the coming week, the Bank of the Philippine Islands (BPI) said.
“The BSP has reiterated that their hikes in 2014 were carried out to preempt the Fed move, allowing the BSP some space to wait and assess the impact of the initial Fed liftoff when it does happen,” BPI said.
Talks on a possible rate hike in the Fed’s December meeting rose when Federal Reserve Chairman Janet Yellen said in her statement that they are not ruling out the start of normalization for the year.
The BPI also said inflation is seen to gradually return to within target in the next six months, possibly due to the upward pressure from El Niño.
“A possible rebound in oil prices may also lead to faster inflation with the Opec [Organization of Petroleum Exporting Countries] signaling willingness to ease production,” BPI said.
Tetangco vowed to keep an eye on developments, not only in the Fed, but in other central banks, as well.
“That said, we will continue to monitor developments, particularly actions of advance economies. ECB cut rates a bit shallower than some anticipated. We will see how the balance of this, possible US liftoff this month and further moves from Chinese authorities would impact on domestic price and growth dynamics,” the central bank governor said.
November inflation
The growth in inflation was primarily due to the higher annual rate in the heavily weighted food and non-alcoholic beverages index, as it advanced by 1.7 percent from a previous month’s growth of 0.7 percent.
Food prices in November 2015 posted a 1.7-percent increase, higher than the 0.7 percent posted in October but lower than the 6.7 percent in November 2014.
“Higher local demand and the lingering effects of Typhoon Lando accounted for the price increases in meat and vegetables, while ample supply sustained the lower price of rice,” Tungpalan said.