Palace says June inflation of 6.4% expected due to global events
Inflation jumped to a 45-month high of 6.4 percent from 6.1 percent in June, on faster increases in the costs of food, non-alcoholic beverages, and transportation, the Philippine Statistics Authority (PSA) said Friday.
The rate this month was also higher than the 3.7 percent registered in July 2021.
For the first seven months, inflation averaged 4.7 percent, above the 2022 target range of 2 percent to 4 percent, the PSA said.
National statistician and civil registrar general Dennis Mapa said the price index for food and non-alcoholic beverages rose 6.9 percent in July, higher than from 6.0 percent in June. The transport index went up 18.1 percent, following the 17.1 percent rise in June.
The PSA also cited an increase in the indices of alcoholic beverages and tobacco (8.5 percent); clothing and footwear (2.5 percent); furnishings, household equipment, and routine household maintenance (3.1 percent); recreation, sports, and culture (2.2 percent); restaurants and accommodation services (3.4 percent); and personal care and miscellaneous goods and services (2.8 percent).
The July inflation fell within the Bangko Sentral ng Pilipinas’ forecast range of 5.6 percent to 6.4 percent for the month. The BSP said in a statement it was consistent with its assessment of elevated price pressures over the near term—including the approved wage and fare hikes and the expectation of higher prices.
“The risk to the inflation outlook is tilted on the upside for 2022 and 2023 but is broadly balanced for 2024,” the BSP said.
It said the protracted war between Russia and Ukraine and the impact of higher oil prices on the cost of goods and services were likely to drive up inflation, as were domestic food prices due to shortages in the supply of several key food items.
Meanwhile, the global recovery is likely to be slower than expected due to tighter global monetary policy conditions and the continued uncertainty from the COVID-19 pandemic, the BSP said.
The BSP said it was prepared to take all necessary policy action—raising interest rates—to bring inflation closer to the government’s target over the medium term and deliver on its primary mandate of price stability.
Rizal Commercial Banking Corp. chief economist Michael Ricafort said the weaker peso could still lead to higher prices or cost of imports.
The peso slightly depreciated against the US dollar by 0.5 percent in July to close at 55.13 against the greenback, after the sharp weakness of P2.605 or 5 percent in June.
Ricafort said inflationary pressures could ease in the coming months in view of the sharp decline in global crude oil prices to new six-month lows, erasing all the increase since the Russia-Ukraine war in February 2022. He also noted the decline in other global commodity prices such as wheat.
Malacañang on Friday said it has already anticipated the uptick in the country’s inflation because of global events such as the Russia-Ukraine war, the ongoing COVID-19 pandemic, and COVID-related lockdowns in China.
The Palace made this remark after the Philippine Statistics Authority (PSA) reported that the domestic rate of price increases rose further to 6.4 percent last July.
“I understand that these were projected even before given the inputs due to the international events that have led to the increase in the prices of petroleum,” Press Secretary Trixie Cruz-Angeles said in a Palace briefing.
Cruz-Angeles said all of these had already been factored in and were even mentioned in President Ferdinand Marcos Jr.’s first State of the Nation Address (SONA) on July 25.
In his speech, Marcos said inflation has accelerated in recent months mainly due to significant increases in international prices of oil and other key commodities.
Marcos said the average inflation for 2022 is projected to range from 4.5 to 5.5 percent following the uptick in fuel and food prices due to the ongoing Russia-Ukraine conflict and the disrupted supply chains.
House ways and means committee chairman and Albay Rep. Joey Salceda, meanwhile, said he would strongly recommend to the House leadership to tackle the Bayan Bangon Muli special powers bill to ensure that the President has the latitude to manage price, supply, and logistics bottlenecks.
“The most important concern of the government will remain food security, food sufficiency, and food prices,” Salceda said.
He also suggested that adjustments in monetary policy can be used only to adjust to global conditions, but “they are no substitutes to supply and price solutions in the real economy.”
Salceda predicted the monthly inflation could peak to as high as 8.5 percent and annual average inflation could reach 6.0 percent.
“Food inflation continues to be on a rapid momentum, from 4.9 percent in May, to 6.0 percent in June to 6.9 percent in July. While there are indications that the momentum is shifting, if all indications are correct, every month will continue to have higher year-on-year inflation than the previous month,” Salceda said.
Salceda said the most important concern of the government will remain food security, food sufficiency, and food prices.
At the same time, he said fuel price inflation was slowing down, possibly because the world was starting to adjust to the Russia-Ukraine war.
“Barring any major developments, I expect fuel price inflation to slow down even further to below 5% by November,” he said.
Salceda said he expects transport inflation to remain below 20 percent at least until September. “However, we must cautiously watch this development, particularly given the resumption of full face-to-face classes by around the same month. Transport prices remain elevated and accelerating, although the momentum also appears to have slowed down.”