INFLATION in February decelerated to 0.9 percent from 2.5 percent a year earlier and 1.3 percent in January as oil prices remained low, data released by the Philippine Statistics Authority (PSA) showed on Friday.
The new figure stands at the low end of the 0.9 percent to 1.7 percent range expected by
the Bangko Sentral ng Pilipinas (BSP), but falls below the forecast range of 1.1 percent to 1.4 percent by analysts polled by The Manila Times and the 1.4 percent estimate by the Department of Finance.
Excluding food and energy prices, core inflation eased to 1.5 percent from 1.8 percent in January and was lower than the 1.6 percent recorded in February 2014.
The National Economic and Development Authority (NEDA) said in a statement the low inflation last month was largely due to downward price movements in transport, and electricity, gas and other fuels, and slower increases in the prices of food and non-alcoholic beverages, and clothing and footwear.
“The persistent global oversupply and record stockpile levels of crude oil contributed to this softer inflation, as prices of Dubai oil, Brent and West Texas Intermediate continued to weaken in January 2016,” Socioeconomic Planning Secretary Emmanuel Esguerra said in the statement.
As of February 2016, the agency, noted that domestic petrol prices displayed downward price adjustments based on figures in the same month in 2015: gasoline (-10.4 percent); liquefied petroleum gas (-11.7 percent); diesel (-26.4 percent); and kerosene (-22.6 percent).
The NEDA added that inflation in food items was also slower due to ample supply conditions.
Slower upward price adjustments were observed in fish, other cereals, flour, cereal preparation, bread, pasta and other bakery products, milk, cheese and eggs, fruits, and vegetables, it noted.
“The implementation of programs related to mitigating the impact of El Niño such as cloud seeding operations, installation of alternative irrigation systems, crop rotation, the use of hybrid crop varieties, and other government assistance for farmers, helped ease price pressures on food,” Esguerra, who is also NEDA director general, said.
An economist from the Bank of the Philippine Islands (BPI) also said the February rate at below 1 percent is tied to the protracted lower oil price scenario, which continues to feed into the rest of the consumer price index basket.
BSP expected to keep policy steady
BPI associate economist Nicholas Antonio Mapa said the lower core inflation, indicates that the effects of the lower energy costs is indeed seeping into other items.
“As base effects wane and oil has found a floor at $34/barrel, we may see inflation trend back towards the lower-end of the BSP’s [2 percent to 4 percent] inflation target,” he said.
With this, he expects the BSP to stand pat at its next Monetary Board meeting, which is scheduled on March 23, as inflation remains subdued.
“The next move by the BSP will be an ‘operational’ one as it prepares for the roll-out of the IRC [interest rate corridor]in June. BSP is expected to tighten its current corridor by lowering the RP [repurchase]and RRP [reverse repurchase]and possibly hiking the SDA [special deposit account]depending on the pace of the Fed rate hike,” he said.
BSP Governor Amando Tetangco Jr. affirmed that declines in housing, utilities, gas and transport were seen as causing slower inflation in the month.
“We will continue to monitor price movements, including emerging second round effects from global oil prices and any shifts in global growth prospects, as these impact domestic growth and inflation dynamics and see if there is need to make any adjustment in policy levers,” Tetangco said in a text message to reporters.
For its part, NEDA said the low inflation environment is likely to continue as external downward pressures remain.
“Notably, global oil prices are expected to be lower by 27 percent on average in 2016,” Esguerra said.
The NEDA chief warned of the potential negative impacts of continued decline in global oil prices on some categories of overseas Filipino workers such as those engaged in oil exploration, construction, and clerical services.
“Given these developments, oil-producing countries may implement austerity measures, cut back on subsidies, postpone infrastructure outlays, and impose higher taxes,” he said.
Thus, Esguerra said the government should strengthen its ability to identify displaced workers and actively extend assistance by facilitating employment opportunities or placement services, re-training, providing livelihood, and/or re-integration.
On the domestic front, while El Niño is expected to gradually weaken starting this month, upward price pressures in food are expected due to the onset of the summer season, he concluded.