đź“·: gmanetwork
The country’s headline inflation this May might settle between the upper end or higher than the 2 to 4 percent government’s target amid mixed economic signals, Bangko Sentral ng Pilipinas (BSP) and private sector analysts said.
In its month-ahead inflation forecast released on Friday, BSP said the inflation likely settled within the 3.7 to 4.5 percent range.
The lower end of the forecast would be slightly lower than the 3.8 percent inflation rate in April.
But a City Post poll of analysts this week yielded a median estimate of 3.9 percent for April inflation, within the BSP’s forecast.
The local statistics authority is set to release May inflation data on June 5.
“Continued increases in electricity rates and vegetables prices alongside recent peso depreciation are the primary sources of upward price pressures for the month,” the BSP said.
“Meanwhile, lower prices of rice, fish, and fruits as well as lower domestic oil and LPG prices could offset the upside price pressures,” the central bank said.
Security Bank Chief Economist Robert Dan Roces expects a slower food price growth for May, although he said rice inflation remains a major culprit.
Data from Philippine Statistics Authority showed that rice inflation remained elevated at 23.9 percent in April from 24.4 percent in March.
“Rising utility costs and a weakening Philippine peso, which inflates import prices, will counteract this slowdown. Transportation costs, on the other hand, are projected to offer some relief,” Roces said in an emailed commentary.
In a Viber message, Rizal Commerical Banking Corp. Chief Economist Michael Ricafort said the consumer goods and services prices are seen to continue its acceleration streak following a series of global and domestic economic developments.
“Global crude oil prices eased in May 2024, after rising in April due to heightened Israel-Iran tensions from April 1-19, 2024. Tensions have since subsided, leading to a drop in crude oil prices to 2.5-month lows since March 14, 2024, and 2-year lows since January 2022. This has resulted in local fuel price rollbacks until early May 2024,” Ricafort said.
Despite the relief in fuel prices, the economist noted that a higher US dollar/peso exchange rate, reaching 58 levels, the highest in 1.5 years, could lead to increased importation costs and a slight uptick in overall inflation.
“The stronger dollar translates to higher costs for imported goods, which could offset some of the benefits from lower fuel prices,” Ricafort added.
The transition to the rainy season has somewhat alleviated El Niño drought risks, potentially boosting agricultural output and reducing the prices of products such as rice, vegetables, and food items.
However, Ricafort cautioned about the damage caused by storms and typhoons in the latter part of May, particularly in Luzon, and the potential for La Niña later in the year.
“While the rainy season can improve crop yields, storm damage remains a risk that could drive prices up again,” he stated.
Ricafort also highlighted the impact of the recent heatwave on electricity demand and prices, pointing to an increase in Meralco electricity rates.
He also mentioned that preparations such as the increased importation of rice, pork, meat, and other agricultural products during lean months are expected to mitigate the adverse effects of both El Niño and La Niña. (TCSP)
