2019 inflation may settle at low end of forecast

MANILA, Philippines — Inflation may likely settle within the lower end of the government’s 2.7 percent to 3.5 percent forecast for full-year 2019, according to Finance Undersecretary Gil Beltran.

Beltran said average inflation may likely hover “more on the lower end” of the 2.7 percent to 3.5 percent assumption set by the Development Budget Coordination Committee (DBCC) in its last meeting in July.

Beltran said inflation for the rest of the year would be driven by food prices, which have been on a continuous downtrend this year, as well as oil prices.

 “(It) depends on oil prices because inflation is also affected by petroleum products, but food items will continue to go down because it has happened for the last five or six months,” he said in an interview with reporters.

The DOF’s chief economist also expressed hope that inflation in August would decelerate further and fall lower than the 2.4 percent inflation rate recorded last July.

Inflation further eased to 2.4 percent in July from 2.7 percent in June and 5.7 percent in July last year, bringing the year-to-date average to 3.3 percent, within the government’s two to four percent target.

This was the lowest inflation level since also hitting 2.4 percent in July 2017.

Earlier, the DBCC lowered its inflation forecast for 2019 to a range of 2.7 percent to 3.5 percent from the previous assumption of three to four percent, citing the implementation of measures to ease consumer prices.

The DBCC was referring to the full implementation of a presidential directives issued last year to increase food supply, as well as the passage of the Republic Act 11203 or the Rice Liberalization Act, which opened up the rice sector.

Finance Secretary Carlos Dominguez said the continued slowdown in inflation is seen to boost domestic consumption this year.

This, in turn, would help the government achieve at least the lower end of its gross domestic product (GDP) target of six to seven percent this 2019, even after a slower-than-expected performance in the second quarter, he said. 

The economy expanded by 5.5 percent in the second quarter – its slowest growth in 17 quarters--from 5.6 percent in the previous quarter and 6.2 percent in the second quarter of 2018.

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno, for his part, said easing inflation continued to provide more room for further monetary easing to help boost the country’s economic growth.

Last week, the central bank slashed interest rates by 25 basis points, bringing the overnight repurchase rate to 4.25 percent. However, interest rates on the overnight deposit and lending facilities were kept at 3.75 percent and 4.75 percent, respectively.