Inflation likely to slow down on falling oil prices, nCoV impact

Manila, Philippines — Inflation may likely slow down in the coming months due to lower oil prices, as well as the impact of the recent outbreak of the 2019 novel coronavirus (nCoV), the Department of Finance (DOF) said yesterday.

In a report, Finance undersecretary and chief economist Gil Beltran said the decline in global oil prices in January, as well as the weak demand for petroleum products due to the impact of the coronavirus outbreak could help ease inflation.

“The downtrend in crude oil prices starting January could slow down inflation going forward. Lower global economic growth due to the coronavirus outbreak will also reduce petroleum demand and thus, dampen inflationary pressures,” Beltran said.

Inflation rose to 2.9 percent in January from 2.5 percent in the previous month. This was, however, still lower than the 4.4 percent rate recorded in the same month of 2018.

This is also well within the government’s two to four percent target range for the year.

Beltran said the uptick in inflation could be attributed to food and non-food items, alike.

“Food inflation is due to a select group of food items including meat, fish and vegetables. Meat, fish, and vegetables, as in 2019, logged in faster inflation than the average price increase, contributing 1.09 percentage point to inflation,” he said.

Beltran said fish, in particular, accounted for 0.6 percentage point of the price increase.

 “Rice, however, tempered the effects of these other food items, reducing the inflation pressure by 0.64 percentage point,” he said.

Beltran said higher fuel prices also pushed inflation up, as Dubai crude oil prices rose five percent to $64.41 per barrel in December from $61.41 in November.

But he said this was cushioned by lower electricity prices.

Month-on-month, Beltran said inflation decelerated to less than 0.6 percent from nearly 0.7 percent in the previous month.

To further push down consumer prices, Beltran said the government needs to increase the food supply in the country.

He said Agriculture Secretary William Dar, over a phone call with Finance Secretary Carlos Dominguez, had agreed to adopt measures to boost food supply, especially now than the open season for fish has started.

Earlier, Dominguez said a benign inflation environment would support domestic consumption. This, together with robust public spending and a revitalized agriculture sector, is seen to drive economic growth this 2020.

The inter-agency Development Budget Coordination Committee (DBCC) projects that the Philippines’ gross domestic product (GDP) would grow between 6.5 percent to 7.5 percent in the next three years.