Economist: Philippines' core inflation to subside in November

MANILA, Philippines — A UK-based think tank is bullish that core inflation within the Philippine economy will ease by November.

In an emailed commentary sent on Thursday, Pantheon Macroeconomics made the case for this owing to how the country computes for this economic indicator.

“The stickiness in core inflation, which slipped to 7.4% from 7.7%, should be less of an issue at the Board’s first Q4 meeting, in November,” the commentary read.

Core inflation, computed without volatile items such as fuel, eased to 7.4% in June. This was a slower print compared to the 7.7% recorded in the preceding month. 

Year-to-date, core inflation stood at 7.7%. 

“As we have been reiterating since November, sustained core disinflation is basically a given, considering that the Philippines’ narrow measure still contains a lot of food and oil-sensitive components,” Pantheon Macroeconomics added.

That consumer price growth is entering a phase of slowdown comes as no surprise. The Bangko Sentral ng Pilipinas launched an aggressive campaign to fight rising inflation which skyrocketed in 2022. 

The BSP ended up injecting 425 basis points into the benchmark lending rate, as prices started surging due in part to the domestic economy’s full reopening.

Monetary policy aside, the national government did its part by resorting to age-old tactics of importing key food products into the country to stabilize price growth. 

After all, experts, including economic managers of the Marcos Jr. administration, reckon that much of the country’s inflation problems came from problems across the supply chain. Bottlenecks and disruptions across the supply chain, inherited from the pandemic, persisted despite the global economy sliding back into normalcy last year. 

That said, Pantheon Macroeconomics is expecting inflation in 2023 to average 5.4%. 

“This implies that inflation could return to the BSP’s 2-to-4% target range as early as September, opening the door for the 50bp-worth of rate cuts we expect in Q4,” they added. — Ramon Royandoyan