Inflation likely eased further to as low as 5.8 percent in May from 6.6 percent in April following the rollback in petroleum prices and the reduction in poultry and fish prices, the Bangko Sentral ng Pilipinas said Wednesday.
“The BSP projects May 2023 inflation to settle within the range of 5.8 to 6.6 percent. Higher prices of rice, vegetables and other key food items as well as the increase in LPG and Meralco electricity rates are the primary sources of upward price pressures for the month,” it said in a statement.
It said the cumulative rollback in domestic petroleum prices and lower poultry and fish prices and electricity rates of various regional power distributors could lead to lower inflation in May.
“Going forward, BSP will continue to monitor developments affecting the outlook for inflation and growth in line with its data-dependent approach to monetary policy formulation,” it said.
Inflation reached a 14-year peak of 8.7 percent in January, before slowing down to 8.6 percent in February, 7.6 percent in March and 6.6 percent in April.
The BSP in its latest policy meeting took a pause in its monetary tightening cycle and kept the key interest rate unchanged at 6.25 percent taking into account the slowdown in inflation in the past months. Before this, the BSP raised the overnight borrowing rate by 425 basis points from just 2 percent in 2021 to tame the inflation and temper the demand for loans.
Data from the BSP showed that bank loans grew 9.7 percent in April, slower than 10.2 percent in March, pulled down by higher interest rates and elevated inflation.
The BSP said that on a month-on-month seasonally-adjusted basis, outstanding universal and commercial bank loans, net of RRPs, went up by 0.6 percent.
Michael Ricafort, chief economist of Rizal Commercial Banking Corp., said the higher US, global and local interest rates partly slowed down the demand for loans during the period.
Ricafort said higher prices/inflation and risk of recession in the US, the world’s largest economy, could slow down global trade and other business/economic activities worldwide.
Outstanding loans for production activities grew by 8.3 percent in April, slower than 9.0 percent in March, driven by the continued rise in lending to key sectors, particularly electricity, gas, steam and airconditioning supply (12.4 percent); wholesale and retail trade and repair of motor vehicles and motorcycles (10.3 percent); manufacturing (9.3 percent); information and communication (19.0 percent); and real estate activities (4.5 percent).
Consumer loans to residents expanded at a faster rate of 22.3 percent in April from 21.8 percent in March, driven by the increase in credit card and motor vehicle loans. Outstanding loans to non-residents also rose 12.2 percent in April, albeit slower than the 13.1-percent increase in the previous month.
“The sustained expansion in bank lending activity suggests that domestic liquidity remains sufficient to support economic activity. Looking ahead, the BSP will continue to ensure that domestic liquidity and credit dynamics are consistent with the prevailing stance of monetary policy, in keeping with its price and financial stability mandates,” the BSP said.
Preliminary data also showed that domestic liquidity, also called M3, grew by 6.6 percent year-on-year to about P16.3 trillion in April, faster than the 6.2-percent growth in March. On a month-on-month seasonally-adjusted basis, M3 increased by about 0.5 percent.