DOF urges manufacturers to seek other sources of raw materials

MANILA, Philippines — The Department of Finance (DOF) has urged local manufacturers to look into other sources of raw materials aside from China to avoid any disruptions in their supply chain which could push up inflation following the spread of the coronavirus disease 2019 (COVID-19).

In his latest economic bulletin, Finance Undersecretary and chief economist Gil Beltran said manufacturers importing their raw materials from China would need to look for alternative sources amid the COVID-19 outbreak.

“The disruption of global supply chains will tend to push prices up. Domestic producers will need to look for alternative supply sources to avoid production cuts,” Beltran said.

Citing initial data from the BOC, the DOF official said the volume of imports from China, the country’s largest trading partner, declined by 34.7 percent in February from a year ago level.

Despite the upside risk posed by the COVID-19 on inflation, Beltran noted that benign global oil prices would still pull down inflation going forward.

Inflation in February moderated to 2.6 percent from 2.9 percent in January and 3.8 percent in February last year.

Beltran said this was also lower than the three percent median outlook of private sector economists for the month.

“The slowdown in average prices of both food and non-food items contributed to the deceleration in price growth,” he said.

The DOF’s chief economist said the price increases for food and non-alcoholic beverages eased to 2.1 percent from 2.2 percent in the previous month.

Month-on-month, food inflation declined by nearly 0.5 percent mainly because of rice, meat, fish and vegetables, he said.

Meanwhile, Beltran said non-food inflation in February dropped to 2.2 percent from 2.7 percent.

“Between January and February, the average price of non-food items stood steady. Lower energy prices dampened the effects of any price uptick in this group. Power and fuel prices declined by as much as 1.1 percent month-on-month and transportation prices, by one percent,” he said.

He said Dubai crude oil prices also dropped to $54.24 per barrel from $63.76 in January and $64.32 a year ago.

“For inflation to fall within the target range, month-on-month price change should be at most 0.3 percent per month,” Beltran said.

Earlier, Finance Secretary Carlos Dominguez said easing inflation, coupled by the robust government spending on infrastructure and social services, could provide a cushion against the adverse impacts of recent developments both in the domestic and global landscape.

These include the Taal Volcano eruption, the African swine fever and the COVID-19 outbreak.