Bangko Sentral ng Pilipinas Governor Benjamin Diokno said monetary authorities are looking at the possible effect of the Taal Volcano eruption on inflation and that he remains confident the increases in consumer prices this year will continue to be manageable.
“Inflation will stay on course in 2020.... I think (National Economic and Development Authority) has already made an assessment and so with the absence of any assessment on our part, we’ll go along with NEDA and it’s not gonna affect too much both the inflation and the growth path,” Diokno said in a briefing on Friday at the BSP.
“At this time, however, the BSP is just starting to assess preliminary data on the possible impact of the ongoing eruption of Taal Volcano on both inflation and growth,” Diokno said.
“The BSP will update its assumptions and forecasts as new information comes to light, in time for the Monetary Board’s first meeting on monetary policy on Feb. 6,” Diokno said.
He said the BSP would continue to monitor prices and other developments to ensure the monetary policy stance remained appropriate and consistent with the central bank’s price and financial stability objectives.
Earlier, the Philippine National Bank said in a report the Taal Volcano eruption would have an impact on the trajectory of inflation in the days ahead because the southern Tagalog region was a main contributor to the supply of livestock and fish nationwide.
PNB cited initial damage estimates by government agencies arising from Taal’s eruption that showed P74.5 million worth of damage to agriculture in the CALABARZON region. About 6,000 fish cages may also be at risk due to the high sulfur content arising from the eruption.
“We worry that the Taal eruption may put pressure on food prices of livestock particularly chicken and hogs (as well as fish supply) since CALABARZON― Taal’s location and region most affected, is a significant contributor to local production of livestock,” it said.
Philippine Statistics Authority data showed that CALABARZON comprising of Cavite, Laguna, Batangas, Rizal and Quezon provinces ranked as the second largest producer of live chicken with an output of 87,000 metric tons, live weight out of a total of 428,800 live weight in the third quarter of 2019.
The region is also the second-largest source of hog supply at 17 percent of total hog production of 551,600 metric tons in the third quarter of 2019.
Fish inflation stood at 7.5 percent in December year-on-year as demand for pork substitutes persisted, likely prompted by consumer aversion to African swine fever.
PNB said high livestock food and fish prices might be allayed by low rice prices. If supply shortfall continued, it said government might ease import constraints on these commodities while imposing regulatory price restraint measures in the affected areas.
“While it’s early days for official estimates of damage to businesses, we sense macro downside risk from this event would take its toll on inflation rather than on domestic demand that could undermine GDP prospects,” PNB said.