MANILA – Philippines’ December 2018 inflation rate is seen to slide further to 5.5 percent as supply-side issues have been addressed and oil prices continue to decline in the international market.
In a report, ING Bank, N.V. Manila Branch senior economist Nicholas Mapa said the fourth quarter harvest season along with grains importation at the latter part of last year “helped stabilize the supply (and price) for most food items with the latest government bulletin showing second week December rice inflation at 10.03 percent compared to November 2018’s 14.46 percent.”
He also said prices of Dubai oil, particularly gasoline, has declined to levels before the implementation of the tax reform in 2018, which saw an increase of P2.50 per liter for oil excise tax.
He explained that “the November-December plunge convinced transport fare adjustments to be rolled back although the government has decided to proceed with the second tranche of its excise tax adjustment to fuel (both gasoline and diesel) of P2 for 2019.”
He also pointed out that prices of oil are seen to fall further to mid-2017 levels.
These factors are seen to get additional boost from the looming signing of the rice tariffication measure, he said.
“Risks to the inflation outlook appear now more tilted to the downside although upward pressure looms with possible extreme weather conditions with El Niño forecasted in the first half of 2019 while surprise OPEC (Organization of the Petroleum Exporting Countries) supply cuts can cause crude oil’s recent plunge to reverse,” he added.
Rate of price increases slowed to 6 percent last November after peaking at 6.7 percent in the previous two months.
This brought the year-to-date average inflation to 5.2 percent, way above the government’s 2 to 4 percent target band for 2018-20.
Monetary officials, however, believe that inflation will go back to within-target levels in the early part of the first half this year. (PNA)
