INFLATION will likely stop falling for the first time in six months in August, but will remain below 5%, regional economists said.
DBS Bank said in a note that it expects Philippine inflation to rise 4.9% year on year in August, up from the 4.7% reported in July.
“Concerns over a supply shortage and dependency on imports had driven rice (weighted at 9.6%) prices sharply higher in recent weeks, prompting the government to impose price ceilings starting Sept. 1,” the bank said.
President Ferdinand R. Marcos, Jr. on Friday issued an executive order which imposes a price ceiling of P41 per kilogram for regular-milled rice and P45 per kilogram for well-milled rice.
As of Aug. 31, the retail price of a kilogram of domestic well-milled rice was between P47 and P56, against P42 a year earlier, according to the Department of Agriculture.
Regular-milled rice prices rose to P42-P55 from P38 a year earlier.
“Concurrently, the economy is also dependent on imported energy, leaving domestic prices vulnerable to swings in international costs, apart from transport fares which had been partly responsible for the sharp rise last year,” DBS Bank added.
In August, oil firms raised pump prices by P5.90 per liter for gasoline, P9.90 per liter for diesel and P10 per liter for kerosene.
Separately, Nomura Global Markets Research said it expects inflation to reflect “a sequential pick-up to 0.5% (month on month) seasonally adjusted from 0.0%, reflecting the significant rise in rice prices and retail fuel prices, consistent with increasing international prices.”
August inflation likely settled at 4.9%, according to a BusinessWorld poll of 18 analysts last week.
If realized, this would be below the year-earlier level of 6.3%. It would also mark the 17th straight month of inflation breaching the Bangko Sentral ng Pilipinas’ (BSP) 2-4% target.
The BSP expects August inflation to settle between 4.8% and 5.6%.
Nomura Global also expects core inflation to further ease to 5.5% in August, in line with weakening economic activity.
Core inflation, which excludes volatile items like food and fuel prices, slowed to 6.7% in July from 7.4% in June. In the first half, core inflation averaged 7.6%.
“We expect the goods trade deficit to widen to $4.9 billion in July from $3.9 billion in June, as export growth turned negative again due to weak external demand from China, Korea, and Singapore. Import growth also contracted by less, driven in part by higher oil import costs,” Nomura added.
The trade deficit narrowed to $3.92 billion in June from a $4.45 billion May deficit and the year-earlier $5.88 billion deficit.
For 2023, DBS sees inflation at 5.4% before easing to 3.2% in 2024. Nomura Global expects inflation to average 5.3% this year and 3.1% next year.
Both full-year projections for 2023 are below the BSP’s 5.6% forecast for 2023. — Keisha B. Ta-asan
