January 31, 2023

Filipino Guardian

Sentinels of Filipino Free Press

GNP sees inflation of 7.1-7.9% in October

A vegetable vendor waits for customers at a market in Quiapo, Manila. — PHILIPPINE STAR/EDD GUMBAN

INFLATION could accelerate by as much as 7.9% in October on the back of rising food prices, higher fares and the peso devaluation, Bangko Sentral ng Pilipinas (BSP) said on Monday.

“GDP forecasts that inflation will settle in the range of 7.1% to 7.9% in October 2022,” it said in a statement.

If realized, October inflation would exceed the central bank’s 2-4% target for the seventh straight month. This would also be faster than September’s 6.9% and 4% in the same month last year.

The high end of GNP inflation forecast or 7.9% would be the fastest in over 14 years or since 9.1% was printed in November 2008.

A BusinessWorld poll of 14 analysts conducted last week gave a median estimate of 7.2% for October annual inflation.

“More importantly, inflation is expected to moderate gradually over the coming months as cost shocks to inflation from weather disruptions and transport tariff adjustments ease,” the BSP said.

The Philippines Statistics Agency (PSA) is due to release October inflation data on November 4th.

“Inflationary pressures for (October) are expected to come from fare increases, increased domestic oil prices, higher soft commodity prices due to the recent typhoons and the devaluation of the peso,” the BSP said.

In October, the price of gasoline, diesel and kerosene saw a net increase of 0.50 pesos, 8 pesos and 4.25 pesos per liter, respectively, data from the Energy Department showed.

Traditional and modern jeepneys began implementing the approved fare increase to P12 and P14, respectively, that same month. Ordinary passenger buses also increased the minimum fare to P13.

Agricultural commodity prices rose in October after a series of typhoons battered the country. Agricultural losses due to Super Typhoon Karding (international name: Noru) reached 3.12 billion pesos, while damages due to Tropical Depression Maymay and Typhoon Neneng reached 594.02 million pesos.

The peso traded around P58 to P59 per dollar for the month. The local unit returned to P57 levels as it closed at P57.97 on Friday.

“This could be partially offset by reductions in electricity tariffs for Meralco-served areas, lower LPG (liquefied petroleum gas) prices and lower fish prices,” the BSP said.

Manila Electric Co. said the total price for a typical household fell P0.0737 per kilowatt-hour (kWh) to P9.8628 in October.

LPG prices were reduced by P2.55 per kilogram (kg) in October, or a total of P28.05 for the standard 11kg bottle.

China Banking Corp. chief economist Domini S. Velasquez said in a Viber message that it would be “very worrying” if inflation hit 7.9% in October, adding that a whole-of-government approach is needed to address this issue.

“There is some demand-side inflationary pressure that is being addressed by BSP’s continued monetary tightening. This is being done in conjunction with some stability in the peso to ensure imported inflation is contained,” Ms Velasquez said.

“However, the food inflation we are witnessing (highest weight and affecting the poor most) can be addressed by other branches of government. Adequate supply of all food should be a priority, especially in this inflationary environment,” she added.

Rizal Commercial Banking Corp. chief economist Michael L. Ricafort said inflation is likely to have peaked in October as global crude prices have fallen significantly since March.

He pointed out that recent typhoons, which caused damage to agriculture, may have caused a temporary spike in the prices of food and other commodities.

“There would also be relief, reconstruction, reparation, reconstruction and other rehabilitation efforts in the storm-hit areas that could offset any losses in economic output/productivity in those areas,” Mr. Ricafort said.

The BSP said it would “continue to closely monitor emerging price developments for timely intervention, which could help prevent further escalation of price pressures”.

At its September 22 monetary policy meeting, the central bank raised its average inflation forecast for this year to 5.6% from 5.4% previously, beating the 2-4% target.

For 2023, GNP expects inflation to average 4.1% before falling to 3% in 2024.

BSP has hiked interest rates by 225 basis points so far this year to cool rising prices. The next meeting to set the guidelines will be on November 17th. – Keisha B. Ta-asan