‘Typhoons could push Sept inflation above 5%’

AFTER accelerating to 4.9 percent in August this year, inflation could quicken above 5 percent in September as the country enters its typhoon season, a private economist has warned.

In its economic commentary on Monday, ING Bank senior economist Nicholas Mapa said the higher August inflation almost certainly puts the September inflation print of the country at a risk of breaching the 5-percent mark this month.

“Inflation which recently peaked at 4.9 percent last month will likely see price pressures heat up anew in September. We expect inflation to move past 5 percent as recent and approaching storm systems will undoubtedly figure into this month’s fruit and vegetable inflation numbers,” Mapa said.

“Fish and meat prices will also likely remain elevated at a time when energy costs rise as crude oil has stayed close to $70/barrel. Furthermore, utility companies and retail fuel distributors have recently announced additional rounds of price increases, all adding to the supply side pressure on headline,” the economist added.

He also noted that the price pressures appear to be accelerating at the “worst possible time” with base effects unfavorable in September.

While inflation in the country recently shot back up to 4.9 percent and hit its highest in more than two years, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said he is keeping the BSP’S resolve to maintain low interest rates for as long as possible to support economic recovery.

Mapa said the higher inflation and the current slow recovery of the country puts the BSP in a difficult position.

“The current spike in inflation continues to be driven mainly by cost-push factors despite a modest pickup in mobility and economic activity. However, recent utility tariff adjustments have begun to surface and should this be followed by other signs of second round effects, such as transport or wage adjustments, the BSP may face even more pressure to resort to costly and deadly rate hikes at a time of economic hardship,” Mapa said.

“A rate hike at this very delicate stage of recovery could be enough to push the economy into the tailspin that sends the Philippines deeper into recession and ultimately into a full-blown depression,” the economist said.