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Freeman Cebu Business

Biz leaders stay cautious despite easing of inflation

Ehda M. Dagooc - The Freeman

CEBU, Philippines — While lower inflation rates recorded in August encouraged businesses to pursue investment plans and expansions, business leaders still remain cautious about full-scale economic confidence going forward.

“We still need to exercise caution with long-term investments in our business operations,” said Mandaue Chamber of Commerce and Industry (MCCI) president Mark Ynoc, in response to the easing of inflation in August to 3.3 percent from 3.7 percent the previous month, as food price increases slowed, according to the Philippine Statistics Authority (PSA).

Ynoc said although PSA recorded 7.1 percent for Mandaue City and 3.4 percent for the entire Central Visayas, “This indicates rapid growth and progress. We see this as an opportunity to keep up with the growing demand with Mandaue having one of the highest in-migration rates in the country.”

MCCI past president Steven Yu welcomed this positive development, saying, “The August inflation reading of 3.3 percent is a positive sign for the country and the economy, especially at this time of the year.”

According to Yu, lower inflation will encourage businesses to reassess their priorities and increase investment.

“With more investments, more jobs will be created. Therefore, a low inflation and low interest rates environment is a big plus for the overall economy,” Yu said.

“Monetary loosening is especially critical at this juncture of our economy because it is losing steam and is slowing down. Before it sets on an irreversible trend of recession, further cuts in interest rates will reverse the trajectory and alleviate more misery and poverty,” Yu added.

Yu expressed confidence that, with this momentum, the Philippines is well-positioned to achieve its target inflation rate of two to four percent by the end of the year.

Inflation is a general increase in the prices of goods and services in an economy. It is measured by the Consumer Price Index (CPI) or other similar indices, which track the average change in prices for a basket of goods and services over time.

Recently, PSA said that food inflation was at 3.9 percent in August, versus the 6.4 percent seen in July.

According to PSA, rice inflation notably decreased to 14.7 percent, down from 20.9 percent in July.

The PSA also reported that transport inflation eased to -0.2 percent, compared to 3.6 percent in July. Likewise, core inflation, which excludes volatile food and energy prices, dropped to 2.6 percent from 2.9 percent the previous month.

Meanwhile, inflation for the poorest Filipino households, or those in the bottom 30 percent income bracket, declined to 4.7 percent from 5.8 percent a month earlier.

Inflation was at 4.4 percent in July. From January to August, inflation averages 3.6 percent.

The government hopes to keep inflation between 2 to 4 percent for this year.

In August, the Bangko Sentral ng Pilipinas (BSP) reduced interest rates by 25 basis points to 6.25 percent, following nearly a year of maintaining a tight benchmark rate.

The BSP anticipates a further decline in inflation this year, driven by reduced tariffs on rice imports. Since late last year, rice inflation has been a key factor contributing to the rising inflation rate.

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