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Friday, March 29, 2024

Finance expects stable inflation in 2017

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The Finance Department said over the weekend it expects inflation rate to remain stable this year after settling at 1.8 percent in 2016. 

Finance Undersecretary Gil Beltran said in an internal economic bulletin the department saw consumer prices remaining favorable in 2017.

He said sufficient food production through investments in infrastructure was crucial to stabilizing the inflation rate.

Beltran said the government should ensure that credit and insurance coverage were available to the agriculture sector.

“Food production is crucial to maintaining this favorable macroeconomic scenario. Support to production through infrastructure development, credit availability and insurance coverage is necessary to sustain this,” Beltran said.

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The Philippine Statistics Authority earlier reported that inflation in December grew at its fastest pace in two years due to higher food and transportation costs.

Inflation stood at 2.6 percent in December, up from 1.5 percent in the same month in 2015, and 2.5 percent in November, bringing the average rate in 2016 to 1.8 percent.

The inflation average was below the Bangko Sentral ng Pilipinas’ target range of 2.0 percent to 4.0 percent.

“For two consecutive years, the average inflation rate has fallen below 2.0 percent, largely on the back of lower fuel and energy prices,” Beltran said. “Stable rice prices also muted inflationary pressures.”

Food in the past two years contributed 1.1 percentage point to the inflation rate, while the share of non-food items doubled from 0.2 to 0.5 percentage point.

Meanwhile, Beltran said inflation would slightly pick up in the coming months because of the normalization of oil prices in the world market.

“In the foreseeable near-term, the general price increase may be above 2.0 percent as indicated by above 2.0 percent core inflation, [which is] an indicator of inflation outlook,” Beltran said.

He said Bangko Sentral had “significant credibility” in managing price expectations, aided by the newly-implemented interest rate corridor system that would make its operations more efficient. 

“This and the government’s prudent fiscal management will continue to help maintain macro-economic stability in the country, which in turn fosters a conducive environment for generating investments,” Beltran said.

Rice inflation year-on-year fell 0.3 percentage point.

“Rice inflation has dropped due to production recovery and timely importation,” Beltran said. “Programs to enhance vegetable farming are needed to temper the double-digit inflation in this sector which has continued for more than a year now.”

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