Inflation rate in June 2020 picked up to a three-month high of 2.5 percent from 2.1 percent in May, led by increases in transport, alcoholic beverage, tobacco and fuel prices, the Philippine Statistics Authority said Tuesday.
The June inflation, however, was slower compared to 2.7 percent in the same month last year.
Data showed inflation averaged 2.5 percent in the first half, or within the target range of 2 percent to 4 percent set by the government for 2020.
Bangko Sentral ng Pilipinas Governor Benjamin Diokno said the June inflation was also within the BSP’s forecast range of 1.9 percent to 2.7 percent for the month.
“The latest inflation outturn is consistent with the BSP’s prevailing assessment that inflation pressures remain limited due largely to the adverse impact of the COVID-19 pandemic on the domestic and global economic conditions,” Diokno said in a statement.
He said the latest baseline forecasts suggested a benign inflation environment over the policy horizon. Inflation is expected to average 2.3 percent in 2020, 2.6 percent in 2021 and 3.0 percent in 2022.
“Domestic economic activity is projected to follow a U-shaped quarterly recovery path with output likely to contract further in the remaining quarters of 2020. Growth is expected to recover in 2021 once the impact of government policy support measures gains traction,” Diokno said.
Domestic liquidity or the money supply circulating in the financial system grew faster in May, while bank lending decelerated on constrained economic activity caused by the implementation of community quarantine to contain the spread of COVID-19 pandemic.
Preliminary data from the BSP showed that domestic liquidity, also called M3, grew 16.6 percent year-on-year to about P13.7 trillion in May, faster than the 16.2-percent expansion in April. On a month-on-month seasonally-adjusted basis, M3 increased by 0.6 percent.
“Demand for credit remained the principal driver of money supply growth. Domestic claims rose by 16.2 percent in May from 15.0 percent in April due mainly to the sustained growth in credit to the private sector,” the BSP said.
Meanwhile, Diokno said the outlook for the global economy further deteriorated with considerable uncertainty brought about by the magnitude and duration of containment measures across all economies.
The National Economic and Development Authority said ensuring price stability through greater use of technology and supporting the agriculture value chain was necessary to help build consumer confidence and support the gradual recovery of the domestic economy.
“The moderate increase in inflation will help in the recovery of consumer demand as the economy gradually reopens,” acting Economic Planning Secretary Karl Kendrick Chua said.
Chua said with the onset of the rainy season and continued implementation of community quarantine measures, the government and the private sector need to use existing digital technologies to better address supply bottlenecks and ensure stable prices.
Meanwhile, the Philippine Statistics Authority said the volume of production index slumped 40.3 percent in May from a year ago, slower than the 43.6-percent in April.
“The reduction in the indices of all industry groups pulled down the VoPI during the month with petroleum products [-91.4 percent], transport equipment [-79.3 percent], and, footwear and wearing apparel [-76.6 percent],” the PSA said.
The National Economic and Development Authority said the manufacturing sector actually showed signs of recovery in May and was expected to continue its rebound as the Philippine economy gradually reopens.
Chua said the recovery was seen in the increase in capacity utilization. As a whole, capacity utilization increased to 73.4 percent in May from 71.2 percent in April.
Capacity utilization of food and beverage manufacturing improved to 76.6 percent and 67.0 percent in May from April’s 76.2 percent and 30.9 percent, respectively.