Analysts said rising global oil prices may have also contributed to the uptick in inflation. — PHILIPPINE STAR/MICHAEL VARCAS
By Luz Wendy T. Noble, Reporter
HEADLINE INFLATION in April likely quickened beyond the official target range for a fourth straight month, as the price ceiling on selected pork and chicken products was lifted and transport costs remained elevated, according to analysts.
A BusinessWorld poll of 17 analysts last week yielded a median estimate of 4.7%, nearer the upper end of the 4.2% to 5% estimate given by the Bangko Sentral ng Pilipinas (BSP) for April.
If realized, inflation would be faster than the 4.5% print in March as well as the 2.2% a year earlier. It would also mark the fourth straight month of inflation overshooting the 2-4% target set by the BSP, and the quickest print since the 5.1% in December 2018.
Analysts said higher meat prices likely fueled a faster increase in the consumer price index (CPI), after the lifting of the 60-day price cap on selected pork and chicken products on April 8.
“We think that pork prices will remain elevated and will continue to be a huge contributor to CPI food’s upward pressure on headline (inflation),” UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said.
To curb the continued spike in pork prices, President Rodrigo R. Duterte last month signed Executive Order (EO) 128 which slashed tariffs for pork imports for one year.
Some analysts believe the EO was not able to immediately lower pork prices.
Security Bank Chief Economist Robert Dan J. Roces said pork prices likely remained high in April, as the tariffs were just recently implemented.
“Imported pork inventory to be sold in May and June would likely be from the higher tariff rate, but July onwards will benefit from Executive Order 128,” Alvin Joseph A. Arogo, vice-president and head of equity research division at Philippine National Bank (PNB), said.
The prices of typical Filipino family food staples such as rice and fish also remained high, Bank of the Philippine Islands lead economist Emilio S. Neri said.
Analysts said rising global oil prices may have also contributed to the uptick in inflation.
“The headline rate is set to jump this month due to higher fuel price inflation, as last year’s plunge in global oil prices enters the annual comparison,” Alex Holmes, an economist at Capital Economics, said.
Year to date, prices of gasoline, diesel, and kerosene increased by P7.60, P5.70 and P4.95 per liter, respectively, as of April 27.
“The transport basket inflation may have accelerated due to private fuel costs while transport fares remain elevated due to the one-off development of banning more than one passenger for tricycles,” Security Bank’s Mr. Roces said.
The April inflation data will be released on May 5.
Analysts believe the BSP will remain accommodative to support an economy struggling to recover amid a prolonged pandemic.
“We expect the BSP to keep rates steady as it views inflation this year to be transitory and also to bolster the economic recovery,” Mr. Roces said.
The central bank expects the CPI to rise by 4.2% this year, faster than the 2.6% in 2020.
BSP Deputy Governor Francisco G. Dakila, however, said in April that they do not see inflation to go beyond 5% at any time during 2021.
By 2022, the BSP projects headline inflation to ease to 2.8%.
“The biggest issue facing the country now remains the elevated number of COVID-19 cases, which has substantially dented economic activity. In its future policy meetings, we expect the BSP to steer its focus more towards growth and less towards inflation,” HSBC Global Research economist Noelan Arbis said.
Economic managers expect the economy to grow by 6.5% to 7.5% this year although multilateral agencies and think tanks have already downgraded their growth outlook for the country due to the ongoing virus surge.
The central bank will have its next policy setting on May 13. In March, the BSP kept the key policy rate at a historic low of 2%.