Thailand
Philippines: Home-quarantined consumers, shuttered businesses start to slow inflation
MANILA, Philippines — Dismal consumption and a halt in public transportation in Luzon started to temper inflation in March, an unwarranted consequence of businesses getting shuttered and consumers being asked to stay home in the Philippines’ most populous island.
Consumer prices rose 2.5% in March, down from 2.6% in previous month and notching the slowest uptick for the year, the Philippine Statistics Authority (PSA) reported on Tuesday.
The latest result was also well within the central bank’s 2-2.8% projection for March. For the entire first quarter, inflation settled at 2.7%.
The slowdown in price increases appeared to affect various products and services. Excluding volatile oil and food prices, which contribute highly to inflation, core inflation went up a slower 3% in March, down from 3.2% in February.
The Bangko Sentral ng Pilipinas (BSP), which aims to keep prices stable to support the economy, expects further inflation weakness down the road.
“Inflation is expected to be benign over the policy horizon due to the potential adverse impact of COVID-19 on the domestic and global economic environment,” the central bank said in a statement.
Lackluster economic activity slows prices
While in normal times slower inflation is something to cheer about, the latest inflation print comes as a result of a massive halt in economic activity in Luzon where the lockdown placed last March 17 and originally scheduled to lapse April 12, was just extended until April 30.
Tight quarantine measures to control the spread of coronavirus disease-2019 (COVID-19) dampened demand for goods and services, which in theory, meant sellers are left with no reason to increase prices, BSP said. Data showed prices of heavily-weighted vices alcohol and tobacco rose “slower” by 18% year-on-year.
Under the lockdown, some businesses were likewise padlocked, and consumers told to stay home, while public transport was shut and nine-hour curfews enforced. The index measuring transport prices, including fares, dropped 1.8% annually in March, figures showed.
On the flip side, food and beverage prices accelerated to 2.6% in March, just when news of supply shortages in groceries and markets were reported in the early weeks of the Luzon lockdown. The government said there should be “unhampered” entry of food trucks in checkpoints, but cascading the order proved slow.
Apart from the ill-effects of the lockdown, decline in global oil prices also tempered average utility costs, which only inched up 1.1% last month, PSA reported.
With prices slowing down, BSP said its policymaking Monetary Board sees “the balance of risks to inflation outlook now leans toward the downside for both 2020 and 2021.”
That means inflation forecasts of 2.2% for 2020 and 2.4% for 2021 last March 19, the latest policy meeting of BSP, would likely get lowered further. The projections already fall at the low-end of BSP’s two to four-percent target for the year.
“The Monetary Board noted that while the enforcement of quarantine measures could help in slowing the spread of the virus, the resulting disruptions to industries and private spending are likely to reduce economic growth in the near term,” BSP said.
“The BSP recognizes that the health and safety of the Filipino people remains the government’s foremost priority,” it added.
Source: https://www.philstar.com/business/2020/04/07/2006064/home-quarantined-consumers-shuttered-businesses-start-slow-inflation