Inflation in January accelerated to an eight-month high of 2.9 percent from 2.5 percent in December on higher prices of food and non-alcoholic beverages, the impact of twin storms in December and the Taal Volcano eruption.
The Philippine Statistics Authority said, however, the January inflation was still slower than 4.4 percent registered in the same month last year.
“The year 2020 started off with a higher national headline inflation rate of 2.9 percent,” the PSA said in a statement.
“The heavily-weighted food and non-alcoholic beverages index, which registered an annual increment of 2.2 percent, primarily contributed to the uptrend of inflation in January 2020,” the agency said.
Inflation was also higher for other commodity groups such as alcoholic beverages and tobacco at19.2 percent; clothing and footwear, 2.7 percent; housing, water, electricity, gas, and other fuels, 2.5 percent; transport, 3.0 percent; recreation and culture, 1.5 percent; and education, 4.7 percent.
A slower annual increase of 2.6 percent was noted in restaurant and miscellaneous goods and services index during the month. The rest of the commodity groups retained their previous month’s annual rates.
ING Bank Manila senior economist Nicholas Mapa said January inflation inched up to 2.9 percent as the crop damage from twin storms in the previous month and a volcanic eruption caused supply disruptions.
“Food inflation hit 2.9 percent, up from 2.5 percent on run-off effects from crop damage induced by twin typhoons in late 2019 and the 2020 volcanic eruption,” Mapa said.
“Meanwhile, excise taxes levied on alcoholic beverages and fuel items pushed up prices for transport [3 percent from 2.2 percent] and alcoholic beverages and tobacco [19.2 percent from 18.4 percent],” he said.
Taal Volcano erupted on Jan. 12. The government earlier said the damage to agricultural and fishery sector in towns located within the 14-km radius hit P3.2 billion.
A report of the Philippine National Bank said inflation could accelerate in the coming months as the affected areas of the eruption were some of the main sources of livestock and fish supply.
Bangko Sentral ng Pilipinas Governor Benjamin Diokno earlier said he was expecting an “uptick” in inflation and that risks to the inflation outlook were tilted to the “upside”.
ING Bank expects inflation to remain within target range of 2 percent to 4 percent and average 3.2 percent this year, but peaking in the third quarter. Mapa said the Monetary Board of BSP was expected to cut policy rates by 25 basis points in its first meeting of the year on Feb. 6.
“With inflation still expected to remain within target and as global growth is likely to be hampered by the spillover effects from the recent 2019-nCoV episode, we expect the central bank to resume unwinding its previous policy tightening to bolster growth momentum and chase the 6.5 percent to 7.5 percent growth target,” Mapa said.