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Philippines: Inflation seen steady at 4.5% for 3rd month
MANILA, Philippines — Economists expect inflation to remain steady at 4.5 percent in May as the reimposition of strict lockdown measures in the National Capital Region and nearby provinces (NCR Plus) kept demand side pressure in check.
ING Bank Manila senior economist Nicholas Mapa said inflation was likely unchanged for the third straight month at 4.5 percent in May as upside pressure emanating from protracted supply side bottlenecks for select commodities, coupled with weak demand due to the ongoing economic downturn, kept demand side pressures in check.
“Downward pressure would be provided by depressed economic demand with select sub-sectors posting negative inflation while other items in the CPI basket show slowing inflation such as rental costs which will likely fall anew on the real estate slump,” he said.
Mapa, however, said overall food inflation is set to moderate on normalizing supply conditions due to harvest season and better weather.
“Upward pressure on headline inflation stemmed from still stubbornly high meat prices, driven largely by pork although the recent implementation of Executive Order 133 should help mitigate pressure from the supply shortage presently and in the coming months,” he said.
Mapa also noted a probable pickup in transport prices owing to higher public transport fares particularly from tricycles.
Likewise, he said the indexation and other legislation for sin products are also expected to create an upward pressure on prices.
Security Bank chief economist Robert Dan Roces said inflation in May was likely similar to April and March, with a forecast range of 4.3 to 4.7 percent, as underlying price pressures continued to ease.
Roces said there was a likely substantial month-on-month decline in the heavily weighted food price basket, helping curb overall price growth on the back of the preliminary effects of the temporary reduction of pork tariffs and the increase of the minimum access volume for imported pork.
Likewise, Roces said the lower food inflation in May would also outweigh the higher electricity costs for the month.
“Threats from second-round effects may remain subdued for now, but the steady uptick in global oil prices as the rest of the world recovers from the pandemic provide significant upward risks to local inflation, and therefore is something to watch out for,” Roces said.
Union Bank chief economist Ruben Carlo Asuncion said the May inflation pace was steady at 4.5 percent as the slight pickup from utilities and electricity costs was offset by the month-on-month easing in other consumer price index food components due to ample supply.
The economists said the Bangko Sentral ng Pilipinas (BSP) would likely to keep an accommodative stance for the rest of the year to help the economy recover faster from the pandemic-induced recession.
“The amount of slack in the economy given that domestic demand remains down may help dampen some pressure from second-round effects, and we expect the BSP will keep the policy rate steady at two percent for the rest of the year to support recovery,” Roces said.
Source: https://www.philstar.com/business/2021/05/30/2101751/inflation-seen-steady-45-3rd-month