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Inflation seen to remain subdued
“We expect that underlying inflation will remain subdued in the Philippines and across most parts of Asia this year, reflecting the stubborn spare capacity existing in most economies given their nascent economic recoveries,” it said.
The STAR/Edd Gumban, File

Inflation seen to remain subdued

Lawrence Agcaoili (The Philippine Star) - May 18, 2021 - 12:00am

MANILA, Philippines — Headline inflation in the Philippines and other parts of Asia may peak in the middle of the year but may remain subdued due to nascent economic recoveries in the region, according to Moody’s Analytics.

“We expect that underlying inflation will remain subdued in the Philippines and across most parts of Asia this year, reflecting the stubborn spare capacity existing in most economies given their nascent economic recoveries,” it said.

Inflation in the Philippines averaged 4.5 percent from January to April, exceeding the upper end of the two to four percent target set by the Bangko Sentral ng Pilipinas (BSP).

Likewise, the pandemic-induced recession extended for the fifth straight quarter with the country’s gross domestic product (GDP) contracting by 4.2 percent as the Philippines continued to struggle to contain the COVID-19 outbreak.

“This culminated in the economy contracting by 4.2 percent in yearly terms in the March quarter, which was sharper than expected and follows from the fourth quarter’s 8.3 percent slump,” Moody’s Analytics said.

Last week, the BSP slashed its inflation forecast for 2021 to 3.9 percent, but raised its projection to three percent for 2022.

“The moderation in the inflation outlook is favorable in that it will give the central bank more breathing room to maintain its dovish stance in the coming months. The pandemic continues to weigh heavily on the economy as the recovery is challenged by a slow vaccine rollout,” Moody’s Analytics said.

The   Monetary Board decided to keep interest rates at record lows to support faster recovery from the pandemic-induced recession. It has kept the benchmark rate at a record low of two percent since the surprise 25- basis-point cut in Nov. 19.

BSP Deputy Governor Francisco Dakila Jr. said inflation is expected to remain elevated until the third quarter before reverting within the central bank’s two to four percent target sometime in the fourth quarter.

“The latest forecast is now lower at 3.9 percent, of course there will be some variations in the monthly inflation path but what is more important is the trajectory of inflation,” Dakila said.

Dakila cited the implementation of Executive Order 128 that imposed tariff reduction on fresh, chilled, or frozen pork products within the minimum access volume (MAV) to five percent for the first three months and 10 percent for the next nine months from the previous 30 percent.

Likewise, the order reduced the tariff on pork imports outside the MAV to 15 percent for the first three months and 20 percent for the succeeding nine months from the current 40 percent.

Malacañang also issued EO 134 further raising the most favored nation tariff rates on imported pork products within MAV to 10 percent in the first three months and 15 percent for the next nine months and for those outside the MAV to 20 percent in the first three months and 25 percent for the succeeding nine months.

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