Inflation seen to ease in Q4 despite Ompong impact
Despite the onslaught of Typhoon Ompong so close to the holiday season, inflation is still expected to ease in the fourth quarter, economic managers said yesterday.
In a press briefing, economic managers expressed confidence that Ompong’s impact on food prices may ease with the implementation of non-tariff measures meant to address supply woes as well as the expected strengthening of the peso versus the dollar that can make imports cheaper during the fourth quarter which traditionally sees higher consumer demand.
Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo said that based on initial estimates, the damage inflicted by Ompong is confined to certain areas and has no widespread effect to the economy.
“Based on the preliminary reports, the impact of Typhoon Ompong is basically isolated and confined to certain areas. So we don’t see generalized effects on the supply logistics or even in terms of production.”
On Monday, the Department of Agriculture reported that damage to agriculture has reached P14.27 billion, with the rice sector hit the hardest.
Guinigundo said they are counting on the immediate implementation of inflationbusting non-tariff measures meant to boost the supply of key food products, especially for rice which accounts for more than nine percent of the consumer price index (CPI).
Among the non-tariff measures included in a proposed executive order is the immediate importation of more rice as well as the immediate release of 4.6 million bags of rice from warehouses of the National Food Authority (NFA) to retail outlets to eliminate the participation of traders.
He also noted that harvest in several provinces has already started, contributing to supply.
“With respect to the rice industry, it is true that this is the lean season. But it some areas, harvest has already started. so the impact on rice would be minimal,” Guinigundo said.
Guinigundo also expressed optimism that the rice tariffication bill, which provides for the liberalization of rice trade, would be passed soon.
“Rice accounts for more than nine percent of the total CPI basket so to the extent that we have more than enough supply of rice I think we can expect some mitigation provided. And hopefully, the rice tariffication bill can be approved in Congress,” he said.
The seasonal appreciation of the peso against the dollar is also be expected to provide relief from soaring prices as import costs for goods may go down.
“The other point is that while it is true that the last quarter of the year is a high demand quarter given the holiday season, but this is also the time when the exchange rate actually appreciates and that could have some countervailing impact on the depreciation of the peso that we have seen in the nine months of the year. So that can provide some mitigation,” said Guinigundo.
Finance Secretary Carlos Dominguez said they are still waiting for the final report on typhoon damage but said the goverment can tap a loan facility with the World Bank to deal with damage caused by Ompong.
The National Economic and Development Authority said it will formulate a rehabilitation and recovery program (RRP) for areas struck by Ompong.
Socioeconomic Planning Secretary Ernesto Pernia said current inflationary pressures are “transient” and can be addressed with the proposed nontariff measures.