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Tuesday, April 16, 2024

Inflation slows down to 6.6%, slowest in 8 months—PSA

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The country’s headline inflation slowed to 6.6 percent in April, the slowest in eight months and the third consecutive decline for the year, according to data released by the Philippine Statistics Authority (PSA).

PSA data showed inflation slowed from 7.6 percent in March but was still higher than the 4.3 percent posted in April 2022. The rate in April was the slowest since August 2022 when inflation was at 6.3 percent.

However, core inflation was at 7.9 percent, which National Statistician Claire Dennis S. Mapa said, is not statistically significant from the 8 percent posted in March.

“If you’re talking of the month-on-month na value, ito ay from 8 to 7.9 percent, 0.1 percentage point but that gap is small to say that it is really statistically significant. But we are seeing that it is already at least going down, slowing down,” Mapa said in a briefing on Friday.

The International Monetary Fund (IMF) earlier recommended that the Bangko Sentral ng Pilipinas (BSP) continue tightening monetary policy due to elevated core inflation. Core inflation excludes certain highly volatile food and non-food items. (Full story here: https://businessmirror.com.ph/2023/05/05/imf-to-bsp-keep-tight-policy/)

Despite this, the President’s economic managers welcomed the slowing down of headline inflation. The Bangko Sentral ng Pilipinas (BSP) said the 6.6 percent inflation rate is within their forecast range of 6.3 to 7.1 percent.

BSP also said this is consistent with the overall assessment that inflation will remain elevated over the near term before gradually decelerating back to target range towards end-2023.

However, the BSP said there remain upside risks to the inflation outlook. One of these include the El Niño which the Philippine weather bureau said has an 80 percent chance of beginning in June to August and last until 2024. (Full story here: https://businessmirror.com.ph/2023/05/04/bsp-flags-el-ninos-inflation-impact/)

“Despite the recent slowdown in food inflation, the potential effect of ongoing supply shortages continues to pose an upside risk to the outlook,” BSP said.

“Other upside risks emanate from the impact of higher transport fares, increasing electricity rates, as well as above-average wage adjustments in 2023,” it added.

Nonetheless, BSP said inflation could be pulled down by factors such as the impact of a weaker-than-expected global economic recovery continues to be the primary factor that could dampen inflation.

These factors, BSP said, will all be considered as well as the first quarter GDP results that will be released next week as basis for its monetary policy stance in the next Monetary Board meeting in May 18.

“(We remain) committed to adjusting the monetary policy stance as necessary to prevent the further broadening of price pressures as well as the emergence of additional second order effects,” BSP said

“The BSP also continues to support the timely and effective implementation of non-monetary government measures to mitigate the impact of persistent supply-side pressures on inflation,” it added.

For its part, the National Economic and Development Authority (Neda) recognized the risks to the inflation outlook to remain tilted toward the upside amid potential transport fare increases, wage adjustments, and domestic food supply pressures amidst the threat of El Niño and the resurgence of African Swine Flu.

Neda Secretary Arsenio M. Balisacan also shared that the Inter-Agency Committee on Inflation and Market Outlook (IAC-IMO) continues its monitoring on the ground.

It also facilitates regular and systematic data-sharing to provide timely recommendations to the President and relevant agencies on measures to mitigate inflation and ensure sufficient food and energy supply.

“It is important to design policies and interventions to help those that will be affected by El Niño, through the provision of seeds or seedlings of non-water- loving crops or crop varieties. Additionally, the government must remain proactive in curbing animal disease outbreaks through stronger border protection and monitoring,” he added.

Meanwhile, IAC-IMO recommended timely and data-supported importations to fill in supply gaps, strategic prepositioning of rice buffer stocks in time for the El Niño, improvement and expansion of the Kadiwa program, and fast-tracking the distribution of targeted subsidies to fishers and farmers in the short term.

Neda noted that food inflation declined to 8 percent in April 2023 from 9.5 percent in the previous month amid slower inflation of vegetables, fish, eggs and other dairy products, meat, and sugar.

Non-food inflation also decelerated to 5.5 percent in April 2023 from 6.3 percent in March, mainly due to slower electricity inflation and a further deflation in private transport as prices of diesel, gasoline, and LPG continued to decline.

“With these developments, Neda is optimistic that the downward trend will continue and settle further within the government’s outlook,” Balisacan said.

For the medium term, the committee recommended enhancing the productivity and resiliency of the agriculture and fisheries sector, promoting investments in facilities, transport, and logistics systems, expanding water infrastructure, and pushing for the passage of critical reforms such as the Livestock, Poultry and Dairy Competitiveness and Development Act, which are priorities contained in the Philippine Development Plan 2023-2028.

Image credits: Svershinsky | Dreamstime.com

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