Inflation rate in May likely accelerated to a new five-year high of 4.9 percent from 4.5 percent in April, driven by higher food prices on supply problems, the Finance Department said over the weekend.
“Supply problems continue to affect food prices with vegetables accelerating to 1.4 percent month-on-month from negative levels since February, while the levels of rice and fish are slowing down to 0.52 percent and 0.72 percent, respectively,” the agency said in an economic bulletin.
The Philippine Statistics Authority is set to release the official inflation data for the month of May on Tuesday.
The Finance Department, however, said the inflationary momentum appeared to be receding as the month-on-month change slowed down from 0.5 percent in April to 0.3 percent in May.
It said electricity, gas and fuels were likely to have reversed to a 1.1-percent price decline month-on-month, while transport inflation continued to accelerate, reflecting domestic petroleum prices.
Sin products and non-alcoholic beverages continued to decelerate month-on-month to 0.74 percent and 2.11 percent, respectively.
“Inflation may appear to be rising year-on-year, but it is actually decelerating as the month-on-month inflation continues to drop,” the DoF said.
“A meaningful drop in prices is attainable if the food supply problem is solved because food accounts for 35.5 percent of the consumer basket. Rice tariffication will help temper rice inflation while productivity programs for the food sector would enhance longer-term price stability,” it said.
The Bangko Sentral ng Pilipinas said earlier that inflation in May likely settled within a range of 4.6 percent to 5.4 percent, based on the 2012 price index.
“Higher domestic petroleum prices amid geopolitical tensions in the Middle East as well as the sustained increase in rice prices present upward price pressures for the month,” the Bangko Sentral said.
It said these could be partly offset by lower electricity rates in Meralco service areas along with lower prices of selected fruits and fish items as supply conditions normalized last month.
“Going forward, the BSP will remain watchful of evolving price trends and ensure that the monetary policy stance remains appropriate to maintain price stability that is conducive to a balanced and sustainable economic growth,” it said.
Inflation in April accelerated to 4.5 percent from 4.3 percent in March, bringing the first four months’ average to 4 percent, representing the upper limit of the government’s 2018 target range of 2 percent to 4 percent.
The Finance Department earlier said the implementation of the Tax Reform for Acceleration and Inclusion law that took effect in January this year was not the only reason for the faster inflation in April.
Finance Undersecretary Karl Kendrick Chua said a spike in rice prices because of perception of thin supply, a weak peso, rising oil prices abroad, better tax compliance of local cigarettes, and growing consumer demand accounted for the bulk of the 4.5 percent inflation in April.
“Inflation rose mainly because of local and global factors. Train accounted for only 0.4 percentage points of the 4.5 percent. In other words, if you could buy items for P100 last year, you need to spend
P104.50 now for them and of that increase, only 0.40 was due to Train,” Chua said.
The Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas, increased the overnight borrowing rate by 25 basis points to 3.25 percent on May 10 in a bid to arrest any potential second-round effects of rising inflation.