Inflation will likely stay low this year given global trends, the Finance department said.
“Prospects for the year point toward subdued price increases due to developments in the international market,” the department said in its latest Economic Bulletin, noting in particular that energy and food prices were unlikely to see substantial increases.
The World Bank, it said, expects energy prices to remain depressed this year, with crude possibly averaging to as low as $37 per barrel from $51 per barrel in 2015. Prices of coal, meanwhile, are expected to fall to $50 per metric ton from $58.
“Further decline in coal prices should translate into lower electricity costs. Much of the country’s electricity generation is from coal plants. Generation charge accounts for nearly half of a typical electricity bill,” the Finance department said.
International food prices are also not expected to spike even as the El Nino weather phenomenon continues to batter the country’s agriculture sector.
“Indeed, forecasts by the World Bank point toward a decrease in international rice price this year. A shortfall in domestic rice production may be compensated for by imports,” the department said.
Prices of Thai rice are expected by the World Bank to ease to $370 per MT this year from $386 per MT last year.
“Subdued inflation enables the country to boost domestic demand without igniting inflation. This will give the BSP (Bangko Sentral ng Pilipinas) ample room to manage domestic liquidity to boost the country’s gross domestic growth,” the Finance department said.
Inflation eased to 1.3 percent in January after rising in the last two months of 2015. The result was slightly higher than the department’s 1.2-percent forecast.