STABLE INFLATION TO HELP PH WITHSTAND RECESSION

Stable and manageable inflation will allow the Philippine economy to withstand the temporary recession caused by the coronavirus pandemic, the Department of Finance (DOF) said.

In an economic bulletin, DOF chief economist and Undersecretary Gil S. Beltran said headline inflation inched up to 2.5 percent year-on-year last month mainly on the back of higher transportation costs when most parts of the country gradually opened up from the COVID-19 lockdown.

For instance, the jump in tricycle fares in June had been blamed on the lack of other means of public transportation even as many returned to work.

“Nonfood items contributed 0.9 percentage point to June inflation, up from its 0.35-percentage point contribution to May inflation,” Beltran said.

“The easing in food prices helped cushion the effect of the increase in nonfood prices. In June, average food prices increased by 2.7 percent, a slower pace than the 2.9-percent price increase in the preceding month,” Beltran added.

But the faster nonfood inflation last June pushed the rate of increase in prices of basic commodities as a whole up by 0.49 percent month-on-month.

“The main reason for the month-on-month inflation rise is the 6.77-percent month-onmonth increase in transportation costs as crude oil prices emerged from a global slump arising from Russia-saudi Arabia oil price war. Dubai crude oil prices rose to $30.47 per barrel in May from $20.47 per barrel in April, a 49.9-percent increase,” Beltran explained.

“Inflation continues to be manageable despite supply issues arising from the pandemic.” The first-half rate averaged 2.5 percent, within the government’s 2-4 percent target band.

“This allows significant elbow room for policymakers to sustain economic policies supportive to growth,” according to Beltran.

Amid low inflation, the Bangko Sentral ng Pilipinas last month further cut the policy rate by 50 basis points, bringing it to the lowest-ever level of 2.25 percent to shore up business and consumer confidence amid a Covid-19-induced recession.