Inflation seen falling below 2% in August

MANILA, Philippines — Economists see inflation falling below two percent until November due to easing food prices, stable oil prices as well as base effects before rising slightly toward the end of the year.

Jun Neri, lead economist at Ayala-led Bank of the Philippine Islands (BPI), said inflation likely eased to 1.8 percent in August from 2.4 percent in July.

The last time inflation fell below two percent was in October 2016 when it settled at 1.8 percent.

“Despite higher fish prices, our best estimate for headline inflation in August 2019 is 1.8 percent. We also expect below two percent figures for both September and October. We should, however, be greater than two percent by December,” Neri said.

Inflation averaged 3.3 percent in the first seven months, well within the two to four percent target set by the Bangko Sentral ng Pilipinas (BSP).

The BSP slashed interest rates by 25 basis points last May 9 and by another 25 basis points last Aug. 8 due to the inflation downtrend, as well as slower-than-expected gross domestic product (GDP) growth in the first half.

The country’s GDP growth averaged 5.5 percent in the first half after slowing to a four-year low of 5.5 percent in the second quarter.

Neri said inflation is seen climbing toward the three percent level in the middle of next year.

Security Bank chief economist Robert Dan Roces said inflation likely averaged 1.8 percent in August due largely to slower price increases of key indices and stable oil prices.

“In addition, because of base effects and anticipated consumption factors in the coming months, we might see inflation levels at sub two percent until November 2019,” Roces said.

Union Bank of the Philippines chief economist Ruben Carlo Asuncion said inflation in August likely cooled further to two percent because of slower annual increases in rice and other food items.

“With the inflation level coming from a high 6.4 percent year-on-year, August inflation is anticipated to have been largely influenced by, particularly, lower rice prices, lower average pump prices for August, and lower electricity cost, specifically Meralco rates that were down for the 4th straight month due to lower spot market prices,” Asuncion said.