As consumer demand recovers in the coming months, food and commodity prices as well as transportation prices may rise, according to the Philippine Statistics Authority (PSA).
On Wednesday, PSA reported that commodity prices rose to 2.7 percent in July, higher than the 2.5 percent published in June 2020 and 2.4 percent in July 2019.
In a briefing on Wednesday, national statistician Claire Dennis S. Mapa said that the recent rise in prices would probably continue.
“We are still seeing a downward trend in several of the foods, but of course there are things that are starting to increase, such as – as we discussed a while ago – meat, chicken, pork. So these are items that would contribute to an increase in the inflation rate due to the greater weight, “Mapa explained.
He said that user prices will also increase when the economy is gradually reopened. Mapa added that the importance of housing, gas, electricity, water and fuels in the consumer price index (CPI) will ensure that any price increase for these raw materials will affect total inflation.
The increase in transport prices is also another important commodity that will achieve a rise in prices. In July, transport was the main contributor to rising inflation.
Mapa said that in July, motorcycle prices rose by 33.9 percent, higher than the 26.8 percent increase that was published in June 2020. He said that in July 201
“While we expect total consumer prices to remain good until 2021, we recognize that the upside risks to the inflation outlook remain,” said Acting Socio-Economic Planning Secretary Karl Kendrick Chua.
“We must remain vigilant and ensure that strategies are well placed to ensure a stable supply and delivery of key goods in all parts of the country,” he added.
According to the local economist, the recent inflation spike would not guarantee that domestic demand has already recovered.
De La Salle University economist Maria Ella C. Oplas told BusinessMirror on Wednesday that the rise in inflation was largely due to the relaxation of quarantine restrictions.
Another factor: some Filipinos “got creative” in using their money by buying online. Oplas said that while eating out and traveling remain limited, more Filipinos found a way to spend, which caused inflation to rise.
However, the return to the modified improved quarantine (MECQ) will affect inflation and the results of the economy during the third quarter.
Still, she expects inflation to run within 2.6 percent to 2.5 percent this year, well within Bangko Sentral ng Philippines’ target.
Ateneo Center for Economic Research and Development (Acerd) Director Alvin P. Ang agreed and told BusinessMirror that inflation will remain during the year.
“The government only needs to ensure the availability of food and address transportation, and inflation will be in that range from 2.5 percent to 2.8 percent for the rest of the year,” Ang said.
“Still weak demand”
At the same time, ING Bank Manila Senior Economist Nicholas T. Mapa said that the 2.7 percent still represented weak economic demand as this is still the center of the BSP target.
With this, he expects BSP to keep interest rates at its next policy meeting. Mapa said that low inflation could lead to a “long break for the governor [Benjamin] Diokno. “
“I continue to expect growth to remain challenging in the coming quarters with Covid-19 cases still on the rise. Weak economic growth is likely to force inflation to remain below 3% in the coming months, ”said Mapa.
With Metro Manila and nearby provinces returning to MECQ, Chua also stressed the need to prevent recurring supply chain disruptions, particularly for food supply and basic needs.
Mr Chua also emphasized the need to support farmers’ access to disaster-proof agricultural technologies, cold stores and support for crop insurance and diversification to help the agricultural sector. The country expects heavier rain and typhoons in the coming months.
“We need to make sure the checkpoints work smoothly, continue to implement food performance protocols, expand mobile market provision and constantly encourage the use of digital marketing platforms, especially in the areas where MECQ was reimpressed,” Chua said.
“We must also protect ourselves against the spread of animal-borne diseases through strengthened border controls and phytosanitary measures and be well prepared for future typhoons this year to prevent loss of life and reduce damage to the economy,” he added.