INFLATION surprisingly slowed to 6.8 percent in May, the Philippine Statistics Authority (PSA) reported on Friday, as fuel price rollbacks led to reduced price pressures.
Consumer price growth slowed from 7.2 percent in April but remained above the 2.0- to 4.0-percent target. It was also lower than the 7.8-percent median in a Manila Times poll of economists and the Bangko Sentral ng Pilipinas’ (BSP) 7.1- to 7.9-percent estimate.
The easing was driven by slower annual increases in the costs of transport, food, housing, water, and gas and other fuels, the PSA said.
Core inflation, which excludes volatile food and energy items, accelerated to 4.1 percent from 3.9 percent.
Year to date, headline inflation remained above target at 4.5 percent while core inflation was 3.4 percent.
Rizal Commercial Banking Corp. chief economist Michael Ricafort said inflation slowed due to diesel and gas price rollbacks that also eased pressures on food, transport and utility costs.
Non-monetary measures such as targeted subsidies also contributed, he added.
Food inflation, in particular, decelerated to 5.8 percent from 6.1 percent, attributed to slower increases in vegetable prices and faster declines in meat prices.
Slower price increases were also seen in fish and other seafood, oils and fats, fruits and nuts and ready-made food products. Prices for milk, dairy, and eggs declined.
On the other hand, faster price increases occurred for rice, corn, flour, bread, pasta and cereals. Rice inflation hit 15.6 percent, the fastest in almost two years.
Government claims credit
Socioeconomic Planning Secretary Arsenio Balisacan welcomed the May inflation results even as he acknowledged ongoing issues.
“While the easing of inflation in May is encouraging, we recognize that price pressures remain elevated,” he said.
Balisacan credited government interventions for the slowdown in transport inflation despite high global oil prices. These included fuel assistance for public utility vehicle operators and drivers and initiatives to ensure adequate fuel supplies.
“The government’s timely and targeted interventions help mitigate the impact of external shocks on Filipino households,” he said.
Balisacan gave assurances that timely, efficient and targeted measures to help stabilize prices would continue to be implemented. These include expanding support for the most vulnerable sectors, exploring alternative fuel sources and accelerating the country’s shift to renewable energy.
Other initiatives include reactivating the El Niño Task Force to help boost preparedness and safeguard farmers’ incomes through cloud-seeding operations, solar-powered irrigation systems, and crop diversification programs.
“The government, through the Uplift committee, will continue to monitor inflation and pursue measures to strengthen domestic food production, improve logistics and market efficiency, and ensure that vulnerable sectors receive timely support,” Balisacan said.
Uplift, or the Unified Package for Livelihoods, Industry, Food, and Transport program, is a government initiative aimed at cushioning the impact of the war in the Middle East.
In Malacañang, Palace Press Officer Claire Castro said the inflation result was “a sign that the government’s measures under the Uplift strategy are gradually producing positive results.”
“But we will not be complacent,” she added.
“That is why we will continue to implement measures to keep prices affordable, protect the budget of each family, and create more jobs for Filipinos.”
Rate hike still likely
Economists said the BSP was still likely to raise interest rates despite the May inflation slowdown.
Ricafort, who expects full-year inflation of between six and seven percent amid higher fertilizer prices and risks of an El Niño later this year, said the central bank could hike its policy rate to 5.5-5.0 percent to be “ahead of the curve.”
Bank of the Philippine Islands lead economist Jun Neri, meanwhile, said the lower-than-expected inflation could allow the BSP to be less aggressive in monetary tightening.
Monetary authorities can now afford to hike by just 50 basis points instead of 75 bps, he added.
The BSP, whose policymaking Monetary Board will meet on June 18, on Friday said it would “take necessary actions to ensure inflation returns to its three-percent target, in keeping with its primary mandate to ensure price stability.” WITH A REPORT FROM CATHERINE VALENTE