Sub-3% inflation seen

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Following the sustained temperance in price pressures, inflation print for the month of May is seen to slip below three percent, coinciding well within the Bangko Sentral ng Pilipinas’ (BSP) target of two to four percent.

This was learned from ING Bank senior economist Nicholas Mapa as he noted on the continued positive developments on local inflationary factors.

“With supply conditions stable for now, we expect BSP’s forecast for 2.9 percent inflation in 2019 to hold with possible further easing given the BSP’s dovish leaning,” Mapa said.

According to him, this outlook can be owed to the observed decline in rice prices as it comprise 9.8 percent of the overall consumer price index (CPI) basket.

“As a commodity in the CPI basket, rice commands 9.8 percent of the total and was one of the main reasons for the 2018 inflation pop that saw price gains top 6.7 percent,” Mapa said.

“With rice supply chains normalizing even ahead of the implementation of Republic Act 11203, which lifted import restrictions, rice prices have fallen for six straight weeks,” he added citing that the data came from the Philippine Statistics Authority.

The analyst then added that aside from the expected price reduction in rice prices, the witnessed dip in other food prices coupled with the sustained importation of goods by the government will help improve May’s inflation figure.

“Meanwhile, the rest of the food basket, which corners 38 percent of the CPI basket, has seen disinflation for seven straight months, helping headline inflation exhibit that humped-shape curve given the supply-side nature of the 2018 episode,” he said.

“With the government proactively importing food stuff with the El Niño dry spell in effect, we can expect food prices to remain stable for the next few months,” he added noting on the 22.5 percent incline in food importations year-to-date.

Likewise, Sun Life Financial – Philippines chief investment officer Michael Enriquez earlier said that there is a strong likelihood that inflation will either taper off or remain stable toward year-end.

“We won’t see that spike again. In our own view, average inflation for the year, we expect it about 3.5 percent, further easing to next year to just about 2.8 percent (2020). So overall, the concern on inflation is way behind us already,” Enriquez said.

According to him, no upticks in inflation should be seen within the year as El Nino’s impact to overall inflation will be just minimal.

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