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Stock Commentary

Asian Development Bank: Karding’s inflation impact minimal

Merkado Barkada
Asian Development Bank: Kardingâs inflation impact minimal

Asian Development Bank (ADB) [link] doubts that expectations of inflation caused by Karding will become reality, noting that the storm “quickly crossed the country with relatively little damage”.

ADB also said that it is not concerned about additional typhoons in Q4 adding to inflationary pressure to prices, though it didn’t provide any explicit reasons why this would be so.

ADB said that it is “unlikely” to revise its inflation forecast for the remainder of the year based on the damage caused by Karding, and is not “looking at any significant changes to the outlook projections that we just released last week”.

ADB just recently raised its inflation outlook to 5.3% for the year, up from its original estimate of 4.9%.


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These are all just scraps of opinion to consume and integrate into our overall understanding of what’s happened, how what’s happened will impact us, and how we should adjust our projections of what might happen to us in the future based on that.

My big concern with ADB’s reasoning is that they acknowledge that Karding's passage through the “rice basket of the Philippines”, but that Karding’s inflationary impact is likely to be minimal because the storm passed quickly and didn’t seem to cause a lot of damage. But what if Karding did cause a lot of damage?

Would ADB suddenly change its Q4 projections based on a new-found respect for potential storm damage? I suspect not.

I think ADB is more or less married to the assumptions that it’s already made, and is basically relieved that Karding’s impact was (compared to fears) small so it didn't have to re-do its homework.

Here is the key take-away: remember this approach if/when ADB further adjusts its GDP growth estimates and inflation forecasts.

If we get storms that cause damage to crops in Q4, they’re going to have to adjust because they explicitly ignored these impacts.

Their numbers represent a “best case scenario” from a weather perspective. 

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Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.

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