Inflation seen rising further but within gov’t target

The rate of increase in consumer prices may rise in the coming months but the Department of Finance (DOF) expects this to be within the government’s inflation target.

Based on the latest DOF Economic Bulletin, the country’s inflation rate could rise to above 2.0 percent in the near-term as global petroleum prices start to re-balance following the decision of oil producing nations to cut output.

“Inflation will likely clock above 2.0 percent in the coming months as suggested by (January) core inflation of 2.5 percent. Rising energy prices will contribute to higher inflation,” Finance Undersecretary Gil Beltran said in a report to Finance Secretary Carlos Dominguez III.

Beltran, who is also the DOF ’s chief economist, noted that the World Bank is forecasting average world oil prices to rise by 28.5 percent to $55 per barrel this year, from $42.8 per barrel in 2016.

Despite the projected increase in fuel prices, he said the country’s macroeconomic fundamentals remain sound as inflation stays within the targeted range.

“This (sound macroeconomic fundamentals) will provide economic authorities flexibility to maintain rapid growth despite uncertainties in the world economy,” Beltran said on Tuesday.

In January, inflation increased slightly to 2.7 percent, matching DOF's internal forecast and 0.1 percentage point higher than in the previous month, but within the target range of 2.0 percent to 4 percent earlier set by the Bangko Sentral ng Pilipinas (BSP).

The slight increase in inflation was driven mainly by food price increase, Beltran said, adding that the food group contributed 1.5 percentage points to the 2.7 percent inflation rate or more than half of the general price increase.

In January, transport prices rose from December’s 1.9 percent to 2.4 percent; clothing and footwear jumped from 2.5 percent to 2.8 percent; housing, utilities and fuels from 1.3 percent to 1.8 percent; and recreation and culture increased from 1.7 percent to 1.9 percent.

Likewise, prices for health also slightly moved up from 2.5 percent to 2.6 percent; and restaurant and miscellaneous services rose from 2.1 percent to 2.2 percent.

Meanwhile, the general price increase for communications (0.1 percent) and education (1.8 percent) remained steady in January.

In contrast, prices of food and non-alcoholic beverages slowed to 3.4 percent from 3.6 percent; alcoholic beverages and tobacco contracted from 6.3 percent to 5.6 percent, while furnishings and household equipment fell to 2.3 percent from 2.4 percent.

Last month, Manila Electric Co. (Meralco) rate per kilowatt hour (kWh) for an average per-month consumption of 300 kWh dipped to R8.4 from R8.7 in December and a year ago.

Meralco's generation rate per kWh also fell to R3.7 during the month from R3.9 in December and in the previous year.

Average price of gasoline also increased to R46.6 per liter from R44.8 in December and R38.2 a year before.

As for diesel, its average price in Metro Manila among the “Big Three” oil companies rose to R30.8 per liter from R29.1 in the previous month, which is also higher than the R20.5 registered in the same month last year.