The inflation rate in December eased further to a seven-month low of 5.1 percent from 6 percent in November, driven mainly by slower annual increases in the indices of food, non-alcoholic beverages and transport, the Philippine Statistics Authority said Friday.
The December inflation was the first time it settled below the 6-percent level since 5.7 percent in July 2018. The December figure brought the full-year average to 5.2 percent, still over the official target range of 2 percent to 4 percent and way above the 2.9-percent average in 2017.
“The slowdown of inflation in December 2018 was mainly driven by the slower annual increments in the indices of food and non-alcoholic beverages at 6.7 percent and transport at 4.0 percent,” the PSA said in a statement.
It said lower annual increases were also noted in the indices of alcoholic beverages and tobacco, 21.7 percent; housing, water, electricity, gas and other fuels, 4.1 percent; furnishing, household equipment and routine maintenance of the house, 3.8 percent; and restaurant and miscellaneous goods and services, 4.3 percent.
“On the other hand, higher annual mark-ups were noted in the indices of clothing and footwear at 2.8 percent and health at 4.8 percent during the period. The rest of the commodity groups retained their previous month’s annual rates,” the PSA said.
Bangko Sentral Deputy Governor Diwa Guinigundo said the supply-driven inflation process that existed in 2018 would not be persistent and short-lived.
“The aggressive monetary tightening the BSP implemented from May to November was therefore aimed only at ensuring that the supply shocks from more than 60 percent increase in oil prices and the significant inflation rates in rice, fish, meat and vegetables did not evolve into sharp gains in wages, transport, and prices of other services,” Guinigundo said.
He said what was pivotal in the anti-inflation efforts was the decisive action of the government to immediately undertake non-monetary measures against inflation.
“Our forecast as of today remains at 3.2 percent inflation for 2019 and 3 percent for 2020,” he said.
Nicholas Mapa, senior economist of ING Bank Manila, said risks to the inflation outlook appeared tilted to the downside and expectations now more anchored especially with more imported grains currently on delivery over the next few weeks, and the rice tariffication bill set for signing and energy prices declining.
“... With inflation trending back to the Bangko Sentral ng Pilipinas’ target of 2-4 percent, the case for the BSP to reverse its stance as early as second quarter of 2019 has gained considerably,” Mapa said.
He said on top of the widely-anticipated 200 basis point cut to reserve requirements scheduled for the year, the Bangko Sentral would likely slash borrowing costs as early as the May 9 meeting to help bolster slowing growth momentum with its price stability mandate safeguarded.