Headline inflation which includes food and energy eased to 4.6 percent in October 2021 from 4.8 percent in September, which is at the lower end of the Bangko Sentral ng Pilipinas’ forecast range of 4.5 to 5.3 percent for October 2021.
IT SEEMS the government’s continuing implementation of policies to ensure affordable food prices and support the transport sector is finally paying off as the Philippine Statistics Authority (PSA) today reported that headline inflation rate eased to 4.6 percent in October 2021 from 4.8 percent in September.
Lower end
National Economic and Development Authority (NEDA) said the figure is at the lower end of the Bangko Sentral ng Pilipinas’ forecast range of 4.5 to 5.3 percent for October 2021.
NEDA said the easing of inflation can be credited to the government’s continuing policies to ensure affordable food prices and support the transport sector.
Food too
Food inflation further slowed down to 5.6 percent in October 2021 from 6.5 percent in September due to the decline in vegetables, fish, and meat inflation.
Vegetable inflation fell to 11.4 percent from 16.2 percent. Likewise, fish inflation decelerated to 9.5 percent in October from 10.2 percent in September 2021.
Rice inflation also remained low and stable, at only 0.5 percent in October.
Meat inflation eased to 11.9 percent in October 2021 from 15.6 percent in the previous month.
Government priorities
This was primarily driven by the decline in pork inflation to 23.3 percent from 36.4 percent, following the issuance of Executive Order Nos. 133 and 134 in May 2021 to help address pork supply shortages due to the African swine fever (ASF).
Month-on-month, pork prices fell by an average of 4.1 percent from September, its largest drop since the height of the ASF in 2020.
To further bring down pork prices to pre-ASF levels, the Department of Agriculture issued Memorandum Circular No. 23, Series of 2021 on October 25 addressing the low utilization of the pork minimum access volume (MAV) plus by allowing the distribution of imported pork to areas outside the NCR Plus.
“One of the government’s highest priorities amid the mobility restrictions is to ensure stable access to affordable food,” said Socioeconomic Planning Secretary Karl Kendrick T. Chua.
“The temporary importation of pork has worked in the National Capital Region. We need to leverage this momentum to allow unhampered supply to the wet markets and to all the regions,” he added.
But the DA is cold to the idea of supplying frozen imported pork in the wet markets because it would endanger food safety.
Government measures
Non-food inflation increased from 3.3 percent to 3.8 percent, driven by higher world market prices for oil.
Transport inflation accelerated from 5.2 percent to 7.1 percent, primarily due to the uptick in private transport inflation from 16.7 percent to 25.5 percent.
However, public transport inflation remained low at 1.2 percent as fares are regulated.
To help public utility vehicle (PUV) drivers cope with rising fuel prices, the government has provided cash grants totaling P1 billion for some 178,000 eligible drivers for the remainder of the year.
The Inter-Agency Task Force has also approved the increase of passenger capacity for PUVs in Metro Manila and adjacent provinces from 50 percent to 70 percent, starting November 4, amid the declining number of COVID-19 cases.
This increase in transport capacity will enable drivers to earn more income while making it easier for people to travel.
Alert Level 2
Also, Alert Level 2 took effect today in Metro Manila and curfew hours were lifted last Wednesday, which would hasten the return to normalcy for almost everyone, maybe not the unvaccinated.
“Many countries, particularly net oil importers such as the Philippines, are feeling the impact of the rising world oil prices,” Chua noted.
“We will continue monitoring the global developments so we can urgently respond to the impact of elevated oil prices on ordinary Filipinos, especially our PUV drivers,” he added.
Supply-side factors
BSP Governor Benjamin Diokno for his part said there are no clear signs of emerging second round effects as inflation remained above the government’s 2 to 4 percent target due to higher oil and food prices.
Diokno said inflation pressures over the past year have been coming mainly from limited components of the consumer price index (CPI) basket and driven mainly by supply-side factors.
Inflation averaged 4.5 percent from January to September as monthly print stayed mostly above the BSP’s two to four percent target since the start of the year.
It eased slightly to 4.8 percent in September from a 32-month high of 4.9 percent in August.
Manageable outlook
The economy, in its early stages of recovery, has unused capacity that is also mitigating second round effects.
“Given the manageable inflation outlook, our priority is to maintain the current monetary accommodative policy for as long as needed to ensure sustained economic recovery,” Diokno said.
“Nevertheless, the BSP stands ready to respond to second round effects or more broad- based pressures as the economy recovers fully,” Diokno added.
The Monetary Board sees inflation accelerating to 4.4 percent this year before easing back to 3.3 percent next year and 3.2 percent in 2023.
“Our manageable inflation outlook provides us with ample room to keep the monetary policy stance sufficiently accommodative to support the ongoing economic recovery,” he explained.
“Inflation expectations continue to be broadly anchored over the policy horizon, with the above-target mean inflation forecast from analysts for 2021 giving way to lower expected inflation in the following year,” Diokno said.
The central bank has kept interest rates at record lows for the past rate setting meetings of the Monetary Board or since November last year when MB last tweaked policy rates.
According to Diokno, the Philippine economy would continue to recover in an environment of tighter global financial conditions as part of the normalization path taken by major central banks.
The BSP chief cited the country’s robust external payments position including the growing gross international reserves (GIR) and the flexible exchange rate system serving as the first line of defense against global shocks.
Tags: #BSP, #NEDA, #headlineinflation, #economy, #BSPGovDiokno