Global oil prices, robust consumer demand push up inflation — BSP

MANILA, Philippines — The factors behind the spiraling of inflation out of control to a fresh five-year high of 5.2 percent in June are temporary and not permanent, according to the Bangko Sentral ng Pilipinas (BSP).

BSP Deputy Governor Diwa Guinigundo told participants of the pre State-of-the-Nation-Address (SONA) Forum the consumer price index (CPI) would remain elevated for the rest of the year and peak in the third quarter because of supply-side factors.

“We expect readings to remain elevated for the rest of the year. Basically it’s driven by supply side factors,” Guinigundo said.

Guinigundo pointed out global oil prices today is going at $72 to $75 per barrel versus the assumption of between $51 and $52 per barrel last year.

“Now for every one percent increase in world oil prices, that would imply a big increase in inflation of at least 0.06 percent,” he said.

Aside from rising oil prices, factors that drove inflation higher include higher electricity rates, rising prices and agricultural products due to weather disturbances, and higher fish prices due to the fish kill in Pangasinan and the ban in the Davao Gulf.

“All of these were taken into account when we say that the June 2018 inflation is high. These are temporary factors, and they are not expected to be permanent,” Guinigundo said.

Inflation leapt to a fresh five-year high of 5.2 percent in June from 4.6 percent in May, bringing the average inflation to 4.3 percent in the first half, exceeding the two to four percent target set by the BSP.

“So this is something of serious concern. But at this point, this was driven by temporary factors not expected to be persistent. We have been expecting this all along so this should not be a surprise,” he said.