Inflation rate accelerated to 4.9 percent in August from 4 percent in July, on higher prices of food and non-alcoholic beverages, the Philippine Statistics Authority said Tuesday.
Data from the PSA showed that the August inflation was the fastest since December 2018 when it hit 5.1 percent. It was also faster than 2.4 percent in August 2020.
The PSA said inflation in the first eight months averaged 4.4 percent, above the target range of 2 percent to 4 percent set by the government for the year.
National Statistician Dennis Mapa said in an online briefing that prices of food and non-alcoholic beverages increased by 6.5 percent in August, compared to the 4.9-percent rise in July. He said food and non-alcoholic beverages accounted for a 77-percent share in nationwide inflation.
Recreation and culture index went up by 0.5 percent in August 2021, after recording annual decreases since August 2020.
The government would continue to ensure a stable food supply to ease prices of fish, vegetables and pork to address the recent uptick in inflation, according to the National Economic and Development Authority.
Food inflation continued its uptrend at 6.9 percent in August. Fish inflation accelerated to 12.4 percent from 9.3 percent, while vegetable inflation rose to 15.7 percent from 5.0 percent on the impact of the southwest monsoon and onset of the rainy season.
Meat inflation reached 16.4 percent in August, up from 16 percent in July. On a month-on-month basis, meat inflation slowed down to -0.4 percent, suggesting some price stabilization.
“We are beginning to see the impact of our proactive interventions to ease food prices, especially pork and rice. The government will continue to adjust and strengthen its policies to ensure that the people have access to affordable food amid the pandemic,” said NEDA director-general Karl Kendrick Chua.
Bangko Sentral ng Pilipinas Governor Benjamin Diokno said the latest inflation was within the BSP’s forecast range of 4.1 percent to 4.9 percent for August.
“The latest outturn is consistent with the BSP’s assessment that inflation could settle close to the high end of the target range in the near term before decelerating back to within the target range by yearend,” Diokno said.
Diokno said in 2022-2023, inflation would likely fall towards the midpoint of the target range, supported by the continued and timely implementation of non-monetary measures and reforms to address directly supply-side pressures on key food items.
“The risks to the inflation outlook remain broadly balanced over the policy horizon. The uptick in international commodity prices due to supply-chain bottlenecks and the recovery in global demand could lend upside pressures on inflation,” he said.
ING Bank Manila senior economist Nicholas Mapa said the BSP might look past this price spike as Diokno continued to vow support for the fledgling economic recovery.
“Elevated inflation will likely sap some momentum from household consumption in the near term. Consumption drives roughly 70 percent of total economic activity in the Philippines. A BSP rate hike will not likely be able to address the current food price spike nor make imported energy cheaper and thus we fully expect BSP to retain its accommodative stance all the more with the economy still in the midst of a recession,” Mapa said.
“Furthermore, we doubt that BSP will continue to craft policy that benefits the Philippines and refrain from conducting monetary policy via-proxy that would entail mimicking rate hikes of other nations around the world,” Mapa said.
Mapa expects the elevated inflation and the 6.9-percent unemployment level in July 2021 to weigh on the Philippine economic recovery.
“We expect full-year GDP to slide to 3.8 percent, below the official government estimate of 4-5 percent. Meanwhile, the peso will likely remain pressured in the near term as BSP signals it will not likely adjust policy rates to combat this current spike in prices,” Mapa said.
Diokno said the emergence of new coronavirus variants, leading to stricter lockdown measures and delayed reopening of the economy would pose downside risks to both aggregate demand and situation.
He said the BSP is ready to maintain its accommodative monetary stance “for as long as necessary” to support the economy’s sustained recovery to the extent that the inflation outlook would allow.