Inflation rate eased to a 12-month low of 3.8 percent in February and returned to the government’s target range after spiking at a nine-year high in the fourth quarter of 2018.
The Philippine Statistics Authority said inflation, or the movement in consumer prices, moderated from 4.4 percent in January, pulled down by slower increases in the prices of key commodities particularly food and beverage.
The February print brought the average inflation in the first two months to 4.1 percent, close to the target range of 2 percent to 4 percent for the year. It was also the slowest inflation in a year or since it settled at 3.8 percent in February 2018.
“Slowdown in inflation remained to be primarily attributed to the slower annual increase in the index of the heavily-weighted food and non-alcoholic beverages at 4.7 percent,” the PSA said in a statement.
The government’s economic managers said the slowdown in inflation showed the government’s resolve coupled with the appropriate measures to rein in inflation.
“We are confident that the successive reforms recently rolled out will sustain this environment and support the growth of the Philippine economy,” the economic managers said.
Except for communication-related expenses, slower price increases in most commodity groups were recorded. Inflation of food and non-alcoholic beverages eased to 4.7 percent in February 2019 from 5.6 percent in January 2019, slightly lower than 4.8 percent in the same month last year.
“With these developments, we are optimistic that the downward path of inflation will continue for the rest of the year. This will be backed by the recent enactment of the Rice Industry Modernization Act [RA 11203], which is expected to bring down rice prices and cut inflation by 0.5 to 0.7 percentage point this year and 0.3 to 0.4 percentage point next year,” the Cabinet officials said.
Data showed that rice inflation moderated to 2.9 percent in February from 4.7 percent in January 2019 on the back of stable rice supply. Based on the monitoring of the PSA, prevailing retail prices of regular-milled rice declined by around P5 since it peaked in September 2018.
Excluding selected food and energy items, core inflation eased to 3.9 percent from 4.4 percent in January.
The Bangko Sentral ng Pilipinas said the latest inflation outturn was consistent with the BSP’s expectation of the continued easing of price pressures.
“Inflation will likely settle within the target range in 2019 and 2020 as previous monetary and non-monetary policy actions work their way through the economy. The recent enactment of the Rice Tariffication Act will further temper rice prices in the near term and help raise long-run productivity in the agricultural sector,” it said.
The BSP said it was watching price developments in the country and would consider all relevant information at its next monetary policy meeting on March 21 to ensure that the monetary policy stance would remain consistent with its primary mandate of safeguarding price stability.
ING Bank Manila senior economist Nicholas Mapa said inflation slid from peak at 6.7 percent in October to 3.8 percent in February in a matter of four months with supply chains now more stable and with oil prices relatively behaved.
“This adds another data point showing that the inflation specter has been tamed for the time being and more importantly inflation expectations are now more well entrenched with the Bloomberg median forecast at 4.0 percent,” Mapa said.
Mapa said with inflation back within target, this left the door wide open for newly-appointed Governor Benjamin Diokno to think about easing off the brakes and look to help support the growth side of the equation.
Diokno, the former secretary of Budget and Management, was appointed on Monday evening by President Rodrigo Duterte to succeed the late BSP Governor Nestor Espenilla Jr. who died of tongue cancer in February.
Mapa said with the price goal seemingly in hand, “it might be time for the BSP to consider possibly reducing the reserve requirement ratio in the near term and eventually lower policy rates to help chase the 7 percent to 8 percent growth target.”
The government’s economic team said that with inflation starting to become manageable, “we can now pay greater attention to programs that will further propel economic growth and help us reach our long-term development goals”.
