Private sector economists expect inflation to peak to 5.9 percent in August from 5.7 percent in July after intermittent weather disturbances affected food prices during the month.
Economists from First Metro Investment Corp. and University of Asia & the Pacific expressed optimism that once it hit the peak in August, inflation would decelerate in the succeeding months.
“Headline inflation will peak in August given the heavy rains and flooding during the month,” FMIC and UA&P said in their monthly ‘Market Call’ report.
“The saving factor in the third quarter would be normalizing food prices, due to September rice harvests and larger imports and downward trending crude oil prices to well below $70/barrel. Electricity rates should also go down as hydro-power plants go full blast during the rainy season,” they said.
They said that inflation in September might slow down to 5.2 percent and further to 5 percent in October.
Inflation in July accelerated to a more than five-year high of 5.7 percent from 5.2 percent in June based on the 2012 price index, on higher food prices. This brought the inflation average in the first seven months to 4.5 percent, beyond the target range of 2 percent to 4 percent for 2018.
The economists said unless inflation started to slow down and exports began to move to positive territory, economic growth would continue to remain tepid at around 6.5 percent or less in the third quarter.
“With construction [especially infrastructure] and manufacturing remaining robust, the underlying growth momentum should hold up,” they said.
Economic growth in the first half averaged 6.3 percent, following the lower-than-expected 6 percent in the second quarter, which was slower than the revised 6.6 percent in the first quarter. The first-semester expansion was below the target range of 7 percent to 8 percent set by the country’s economic managers for 2018.
The accelerating inflation rate compelled the Bangko Sentral ng Pilipinas to raise the benchmark interest rates by a rare 50 basis points in August to 4 percent in a bid to rein in inflation.
“The August inflation may actually be higher than July. The peak may be in August or September,” Bangko Sentral ng Pilipinas Governor Nestor Espenilla said.