Inflation likely up anew in March

Philippine headline inflation likely further accelerated in March, analysts polled by The Manila Times said.

Projections for the month ranged from 4.6 to 5.0 percent with a 4.8-percent average, up from the 4.7 percent recorded in February.

It was also significantly higher than the 2.5 percent seen in March last year.

The Bangko Sentral ng Pilipinas (BSP) earlier projected inflation to remain at 4.7 percent.

The Philippine Statistics Authority (PSA) will release official March inflation data on April 6.

Union Bank of the Philippines Chief Economist Carlo Asuncion forecast inflation to settle at 5.0 percent.

“Movement restrictions put a downward pressure on prices and impact demand,” said Asuncion.

Asuncion said the imposition of the enhanced community quarantine (ECQ) due to increasing coronavirus disease 2019 (Covid-19) cases will likely be felt in April.

“If it were earlier imposed, March data will make it obvious. If ECQ is extended, April print may feel the pinch. However, it should be stressed that annualized rates of headline and food inflation (measure of momentum) are already fading and starting to peak,” he added.

Asuncion said inflation may peak in May and will start to decline onwards, noting that the full-year figure is expected to settle at 4.9 percent.

ING Bank Manila Senior Economist Nicholas Mapa, for his part, said inflation likely settled at 4.9 percent.

“We still expect food and transport inflation to be the main determinant for the pick up in inflation. Meanwhile, utilities may offset the upward pressure on prices with Meralco rates down while depressed domestic demand, evidenced in disinflationary trends in rent and deflation for other services, show that Filipino consumers are struggling mightily throughout the pandemic,” he said.

Meralco, or Manila Electric Co., reduced its per-kilowatt-hour (kWh) rate for households consuming 200 kWh monthly by P0.3598 last month.

“Nonetheless, unfavorable base effects will likely kick in by April but the headline print may start to decelerate in June should supply side remedies (especially to address African swine
fever) do take effect,” said Mapa.

According to Mapa, the imposition of the ECQ will also have an effect on consumer prices.

“The movement restrictions are expected to also have an impact on inflation with increased demand for food and basic necessities kicking back into high gear amidst fear and anxiety caused by the mobility curbs,” said Mapa.

“Food supply and other deliveries from outside the NCR Plus bubble will not be impeded but overall production may have some constraints should factors of production and labor face additional hurdles to moving in and out of the bubble region,” he added.

The NCR Plus bubble comprise Metro Manila and the provinces of Bulacan, Rizal, Laguna and Cavite.

Oil and food prices

Robert Dan Roces, chief economist of Security Bank Corp., estimated inflation to settle at 4.9 percent with a forecast range of 4.7 to 5.1 percent.
In a report, Roces said that based on PSA price monitoring reports, food prices were generally lower in March.

“Meat and pork retail prices remained steady on average due to the price ceiling, but vegetable and fish prices have gone down with the latter benefitting from the lifting of the annual three-month fishing ban imposed by the Bureau of Fisheries and Aquatic Resources that started in November 2020,” said Roces.

The government imposed a 60-day price ceiling on pork and chicken products in Metro Manila. Under Executive Order 124, the price ceiling per kilogram of kasim (shoulder) and pigue (back leg or ham cut) is P270, P300 for liempo (belly), and P160 for dressed chicken.
Roces said oil companies also implemented cuts in pump prices to reflect global oil price movements as governments across the globe imposed restrictions amid renewed spikes in Covid-19 cases, which dragged down crude oil markets.

He said headline inflation will likely remain elevated at 5.0 percent this year due to low base effects and the threat of forward inflationary pressures mostly emanating from commodity prices led by oil that could see a resurgence of upward movements should major economies reopen again.

“However, the reimposed ECQ in the Greater Manila Area as well as some localized curbs in major cities nationwide could cause slower price growth relative to the extent of the new lockdowns, thus our estimates have a downward bias. We maintain that core inflation will be a key determinant of consumption recovery, as the release of pent-up demand, should increase consumption if the curbs are lifted amid a wider vaccine rollout that may improve consumer confidence,” he said.

Rizal Commercial Banking Corp. Chief Economist Michael Ricafort, meanwhile, gave the lowest projection of 4.6 percent.

Ricafort said the ECQ could significantly reduce demand conditions and the overall economic activities, thereby could somewhat fundamentally help ease inflationary pressures.

“Furthermore, higher inflation largely due to supply-side factors would be transitory in nature especially if local agricultural supply improves,” he said.

“For instance, better weather conditions with the onset of the dry season and the expected end of La Nina in March 2021 have resulted to the sharp reduction in the prices of some agricultural products, in view of new planting after the series of typhoons damage since November 2020 led to higher prices of food and other agricultural products since then,” added Ricafort.

Ricafort said non-monetary measures to increase the local supply of food products would also help stabilize meat prices.