BSP downplays El Niño impact on inflation

The Bangko Sentral ng Pilipinas (BSP) has downplayed the impact of the occurrence of El Niño this year on the sustained easing of inflation.

BSP Deputy Governor Diwa Guinigundo said the impact of the prolonged drought could be addressed by mitigating measures laid down by the government.

For one, Guinigundo said the National Food Authority (NFA) has approved the guidelines for outquota importation of rice as early as November last year, which could help mitigate the impact of El Niño.

El Niño refers to above-average sea surface temperatures in the central and eastern tropical Pacific Ocean and is associated with below normal rainfall.

“If there is going to be an El Niño phenomenon that could happen any time during the year, this could be addressed by such mitigant as out-quota importation,” Guinigundo said.

He pointed out 174 firms and cooperatives have already applied for out-quota importation covering 1.2 million metric tons of rice as of Jan. 18.

This, he added, is on top of the minimum access volume (MAV) of 200,000 metric tons and government to private procurement covering another 200,000 metric tons that are expected to arrive during the lean season.

“In other words, if El Niño occurs, there’s a good fallback position in terms of out-quota importation,” Guinigundo said. Rice accounts for nearly a tenth of the consumer price index.

Inflation continued to ease to six percent in November, 5.1 percent in December, and a 10-month low of 4.4 percent in January after peaking at 6.7 percent in September and October last year due to higher oil and food prices as well as weak peso.

The central bank said the risks to the inflation outlook are seen to remain evenly balanced for 2019 while leaning toward the downside for 2020 given a more uncertain global economic environment, which in turn could temper potential upward pressures from commodity prices in the coming months.

It lowered its inflation forecast to 3.1 percent this year due to declining global oil prices but kept next year’s projection at three percent.

“The Monetary Board also emphasized that the BSP remains vigilant against developments that could affect the outlook for inflation and is prepared to take appropriate policy action as necessary to safeguard its price and financial stability objectives,” the central bank said.