Inflation to remain benign in 2020 and 2021 — Diokno

Banko Sentral ng Pilipinas Governor Benjamin Diokno expects inflation to remain benign in the months ahead, as consumer prices in the fourth quarter of 2019 eased to 1.6 percent from 1.7 percent a quarter ago.

The latest data brought the full-year average to 2.5 percent, well within the target range and significantly slower compared to 5.2 percent a year ago.

BSP Governor Benjamin Diokno
“Inflation will continue to be within the target range of 2 to 4 percent in 2020 and 2021,” Diokno said during the Fourth Quarter 2019 Inflation briefing held at the Bangko Sentral.

Inflation slowed down slightly in the fourth quarter due mainly to lower food and non-food inflation. Core inflation also slowed to 2.7 percent in the fourth quarter from 2.9 percent a quarter ago.

But Diokno said upside risks to inflation over the near term could come mainly from potential volatility in international oil prices, as well as from the potential impact of the African Swine Fever outbreak and recent weather disturbances and natural hazards on domestic food prices.

He said the subdued pace of global economic activity amid trade policy uncertainty and increased geopolitical tensions could temper upward pressure on commodity prices.

BSP Deputy Governor Francisco Dakila said monetary authorities would consider a lot of factors during the next policy meeting on Feb. 6—such as the inflation outturn in the month of January and the gross domestic product growth of 6.4 percent in the fourth quarter—to see if there would be a need to change or not the current policy stance.

Diokno last week said monetary authorities were looking at the possible effect of the Taal Volcano eruption to inflation. He remained confident the increases in consumer prices this year would continue to be manageable.

Earlier, the Philippine National Bank said in a report the Taal Volcano eruption would have an impact on the trajectory of inflation in the days ahead because the southern Tagalog region was a main contributor to the supply of livestock and fish nationwide.

“We worry that the Taal eruption may put pressure on food prices of livestock particularly chicken and hogs (as well as fish supply) since CALABARZON—Taal’s location and region most affected, is a significant contributor to local production of livestock,” PNB said.

The eruption of Taal Volcano last week resulted in around P4.314 billion in economic losses in the affected towns within the 14-kilometer radius or high-risk areas, according to the estimate of the National Economic and Development Authority.

NEDA said in a report this week the losse were equivalent to 0.17 percent of the 2018 gross regional domestic product of the Calabarzon (Cavite, Laguna, Batangas, Rizal, Quezon) Region.

NEDA said of the amount, P3.167 billion was lost in the agriculture and fishery sector; P357.3 million in industry sector; and P789.1 million in the services sector. NEDA used 2018 as the basis for the loss computation.

The towns and cities within the 14-km radius considered as high-risk areas are San Nicolas, Agoncillo, Talisay, Laurel, Tanauan City, Tagaytay City, Cuenca, Mataas na Kahoy, Balete, Lemery, Taal, Lipa City, Santa Teresita, Malvar, Alitagtag, and San Jose.

But the economic losses were even bigger if the towns within the 17-km radius from the eruption site are considered. NEDA said the foregone income in the economic sectors within the 17-km radius reached P6.657 billion, or 0.26 percent of the 2018 gross regional domestic product of Calabarzon region.

Topics: Banko Sentral ng Pilipinas , BSP Governor Benjamin Diokno , inflation
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