Inflation rate, or the movement in consumer prices, softened to 2.5 percent in March from 2.6 percent in February and 3.3 percent a year ago as the government started a Luzon-wide quarantine to contain the spread of coronavirus disease 2019.
The Philippine Statistics Authority said this brought the average inflation in the first quarter to 2.7 percent, within the government's target range of 2 percent to 4 percent for 2020.
The PSA said inflation decelerated in March because of lower oil prices, transport fares, electricity rates and alcoholic beverages and tobacco.
"On the other hand, higher annual increases were noted in the following commodity groups: food and non-alcoholic beverages [2.6 percent], furnishing, household equipment and routine maintenance of the house [4.2 percent], communication [0.5 percent] and recreation and culture [1.6 percent]," the PSA said.
Excluding selected food and energy items, core inflation slowed down to 3 percent in March from 3.2 percent in February and 3.5 percent a year earlier.
Among food products, fish, fruits and vegetables posted faster increases in March as consumers stayed home amid the community lockdown.
The PSA said that in Metro Manila, inflation rate decelerated further to 1.7 percent in March from 2 percent in February and 3.2 percent a year ago.
Inflation in areas outside the National Capital Region also moved slower at 2.7 percent in March, compared to 2.8 percent in February and 3.4 percent in March 2019.
With the benign inflation outlook, the Bangko Sentral ng Pilipinas which cut the overnight borrowing rate by 50 basis points to 3.25 percent last month is expected to continue its monetary easing to support businesses and households as they cope with the economic impact of the disease.
The Asian Development Bank expects inflation rate to settle at 2.2 percent in 2020 and 2.4 percent in 2021, with further downside pressure from lower global oil prices.
"With inflation projected to remain within the central bank’s target range of 2 percent to 4 percent, authorities have room for further monetary policy expansion to cushion any lingering effects of the pandemic on the economy," the ADB said.
It also predicted that the gross domestic product growth would slow to 2 percent in 2020 from 5.9 percent in 2019. It said growth could rebound to 6.5 percent in 2021.
“This unprecedented and extraordinary public health emergency brought about by the COVID-19 pandemic will substantially slow down economic growth this year, with most of the contraction in the economy occurring in the second quarter. We are anticipating a bounce back starting in the second half of this year, supported by the government’s stimulus spending and easier monetary policies,” said ADB country director for the Philippines Kelly Bird.
The quarantine measures shut down schools and most government offices and private establishments in Metro Manila and the entire Luzon island, which accounts for over half of the country’s total population and generates more than two-thirds of the country’s overall GDP.