Inflation still manageable — DOF
Despite a slight uptick in June, the country’s inflation environment remains manageable, providing enough headroom for economic managers to implement policies which shield the economy from the impact of the global health crisis, according to the Department of Finance (DOF).
In a report, Finance Undersecretary and chief economist Gil Beltran said inflation remains manageable despite the supply issues arising from the COVID-19 crisis.
“This allows significant elbow room for policymakers to sustain economic policies to support growth,” he said.
Inflation settled at 2.5 percent in June, faster than the 2.1 percent in May, but slower than the 2.7 percent recorded in the same month last year.
This brought the year-to-date growth in inflation to 2.5 percent, still well-within the government’s outlook of two to four percent for this year.
“The upward adjustment in prices is mainly traced to non-food items, in particular, transportation,” Beltran said.
He said non-food items contributed 0.9-percentage point to the June inflation, higher than the 0.35-percentage point contribution in May.
However, Beltran said that the easing of food prices helped cushion the impact of the increase in non-food items.
“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 said.
On a month-on-month basis, Beltran said inflation rose to 0.49 percent from the 0.08 percent posted in May.
“The main reason for the month-onmonth inflation raise is the 6.77 percent month-on-month increase in transportation costs as crude oil prices emerged from a global slump arising from the Russia-Saudi Arabia oil price war,” he said.
Dubai crude oil prices rose to $30.47 per barrel in May, a 49.9 percent increase from $20.47 per barrel in April.
Earlier, Acting Socioeconomic Planning Secretary Karl Chua said the “moderate increase in inflation” indicates a recovery in consumer demand alongside the gradual reopening of the economy.
Economic managers expect the country’s gross domestic product to contract between two and 3.4 percent this year, ending 22 straight years of positive growth since the 0.5 percent gross domestic product (GDP) contraction in 1998 due to the Asian financial crisis.
To address the impact of the pandemic and protect the health of Filipinos, the government laid out a P1.74 trillion socioeconomic strategy against COVID-19.
The Bangko Sentral ng Pilipinas (BSP), for its part, delivered a series of rate cuts to cushion the impact of the pandemic.
The Monetary Board has slashed interest rates by 175 basis points so far this year, bringing the overnight reverse repurchase rate to an all-time low of 2.25 percent.
It also lowered the reserve requirement ratio for big banks by 200 basis points to 12 percent on March 30 as part of its commitment to bring down the level to single digit by the middle of 2023.