Inflation achieves a new 5-month low: NEDA. Eases in June to 2.8 percent. Favorable domestic prices of Petrol, food products help.

Inflation favorable this year.



In spite of the turmoil and upheavals that the nation is undergoing, the economy continues to do well. The fall of inflation in June to a five-month low of 2.8 percent indicated this.

Consequently, National Economic and Development Authority (NEDA ) said on Wednesday that the outlook till the yearend appears to be good. Hence, the stability in prices will continue to support economic growth.

The headline inflation in June was 2.7% which is the lowest since January. Thus, the prices for basic goods stood below 3% for the first time since February.

This emerged from the latest Philippine Statistics Authority (PSA) data. However, the figure fell below the 1.9 percent for June last year. Month on month slower food and non-food price adjustments emerged as the causes for this.

Furthermore, inflation for food and non-alcoholic beverages dropped from 3.8% in the previous month to 3.5% in June. Similarly, non-food inflation dropped to 2% in June as compared to 2.5% in May according to NEDA.

In addition, the low year-on-year increase in prices of domestic Petrol contributed to this phenomenon.

The figures provided by NEDA are as follows:
Kerosene From 9.6% to 3%
Diesel From 13.6% to 5.3%
Gasoline From 9.9% to 5.1%

Moreover, as against the government’s targeted inflation of 2-4%, the first half of financial year achieved 3.1% inflation.

Commenting on the results, Nestor A. Espenilla Jr., Governor, Bangko Sentral ng Pilipinas mentioned that the results were not unexpected. Even the drop in June confirmed with the BSP forecast.

Lower Power and Petrol rates were the drivers of our economy in this period, he asserted. This enables fine tuning deployment of our monetary instruments to control the domestic financial market, Espenilla said.

Rosemarie G. Edillon, Undersecretary and officer-in-charge, NEDA commented that short-term domestic economic activity emerges stronger when inflation is stable.

However, she cautioned against risks to inflation from various sources including tax reform.

In addition, the proposed comprehensive tax reform program could result in raised inflation, Edillon stated. Hence, she advised the government to adopt precautionary measures to arrest the short-run effects.

Therefore, the public should be explained benefits of the comprehensive tax reform program. The emphasis should be in communicating special improvements in productivity that push down inflation.

Moreover, weather forecasts till the end of 2017 predicted minor disturbances due to El Nino and La Nina, she added. This favors better prices and enhanced agricultural production, Edillon stated.

However, she exhorted the government to accelerate the implementation of climate change adaptation measures. Furthermore, we should take the maximum advantage of the good weather forecasts, she said.

Hence, the priority areas for investments are:
• Moisture extraction,
• Promoting water-saving technology,
• Advanced atmospherics, and
• Catchment basins.

The agricultural sector needs resilience against climate through disaster mitigation. The first step to improve the infrastructure would be:
• Immediate repairs to damaged irrigation systems,
• Periodic maintenance and repairs.

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Umrao Singh
Written for: Lars-Magnus Carlsson.
Thursday, July 06, 2017