Philippines inflation likely eased in October – think tank

MANILA, Philippines — Inflation in the Philippines likely eased in October with the reversal in rice price hikes expected to have kicked in, UK-based think tank Pantheon Macroeconomics said.

“We expect inflation for October to fall to 5.3 percent from September’s four-month high of 6.1 percent, as the reversal of the August surge in rice prices finally filters through,” Pantheon Macroeconomics economists Miguel Chanco and Moorthy Krshnan said in a report.

The headline inflation rate rose for a second straight month to 6.1 percent in September from 5.3 percent in August as food prices saw faster upticks.

Food registered a higher inflation of 10 percent in September from 8.2 percent in August due mainly to the heavily weighted rice.

Despite the government’s imposition of price caps on regular milled and well-milled rice, rice inflation in September surged to 17.9 percent, the highest rate seen for the staple since March 2009, and up from 8.7 percent in August.

The Pantheon economists said the wholesale price figures suggest strongly that the surge in food inflation from August to September at the retail level is unsustainable.

Last week, National Economic and Development Authority Secretary Arsenio Balisacan said he is hopeful inflation would ease in October as global rice prices have declined slightly and retail prices have adjusted to market conditions.

“With current availability of supplies and timely arrival of imports, I think that we see less of those pressures,” he said.

With inflation expected to have made a U-turn in October after rising for a second straight month in September, the Pantheon economists said they continue to believe a return to the two to four percent target range by year-end is possible.

Inflation from January to September averaged 6.6 percent, higher than the Bangko Sentral ng Pilipinas’ (BSP) two to four percent target band.

While it looks like the economy managed to avoid a technical recession based on data, the Pantheon economists said the slowdown in economic growth likely persisted in the third quarter.

“If we’re right, the headline year-over-year rate should slide to 3.1 percent, the weakest since the third quarter of 2011, excluding the COVID-hit years,” the economists said.

They said investment is expected to have continued to shrink, while the boost from net trade likely fell steeply.

The Philippine economy expanded at a slower pace of 4.3 percent in the second quarter from the previous quarter’s 6.4 percent, and the 7.5 percent in the second quarter last year.

With first semester growth at 5.3 percent, the economy will need to grow by 6.6 percent in the second half to hit the low-end of the government’s six to seven percent growth goal for this year.

The Pantheon economists added they still do not expect rate action in upcoming policy meetings of the Monetary Board next month and in December “as the next few key releases should quell the BSP’s hawkish inclination.”

The Philippine Statistics Authority is set to release October inflation data on Nov. 7, and third quarter economic performance on Nov. 9.