Slower inflation fuels hope for Philippine car sales rebound
MANILA, Philippines — Car sales in the Philippines could see a rebound this year, with inflation seen cooling down and base effects dissipating, a global bank said Friday.
Citing data reported by the Chamber of Automotive Manufacturers of the Philippines Inc. (CAMPI) and the Association of Vehicle Importers and Distributors (AVID), ING Bank N.V. said Philippine auto sales dropped 17.3 percent in January 2019.
ING Bank partly attributed the weak car sales for the first month of the year to possible base effects from the car buying spree seen in late 2017 and early 2018 ahead of the implementation of new excise taxes on road vehicles.
“The slump in vehicle sales for both CAMPI and AVID in 4Q 2018 was reflected in the disappointing growth for durable equipment, expanding by 3 percent after posting double-digit growth for the previous two quarters,” ING Bank senior economist Nicholas Mapa said.
“AVID pointed to more ‘conservative’ buying patterns in late 2018 from Filipinos given ‘elevated inflation and higher interest rates’, although both CAMPI and AVID remain optimistic for a rebound in 2019 as car manufacturers roll out new models and inflation is decelerating,” Mapa added.
Higher excise taxes on certain commodities, food supply bottlenecks and rising fuel prices pushed up inflation to multi-year highs last year, eroding the purchasing power of Filipino consumers which, in turn, weighed on new car purchases.
To keep inflation in check, the Bangko Sentral ng Pilipinas lifted its policy rate by a cumulative 175 basis points last year, tempering consumers' appetite for auto loans.
Inflation stood at 4.4 percent in January, the slowest rate since April 2018 but still above the government’s 2-4 percent target range.
Car sales together with construction vehicles form part of the "road vehicles component" of durable goods equipment in the national income accounts, comprising roughly 7 percent of total GDP, ING Bank noted. In 2018, the economy grew at a three-year low of 6.2 percent, with officials pinning the blame on elevated prices.
“With base effects ending by February 2019 and with inflation expected to return to within target as early as March, we hope to see a rebound in this key figure to give a boost to overall GDP,” the bank said. — Ian Nicolas Cigaral
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