La Niña next to put pressure on consumer prices

Extreme weather conditions are posing threats to inflation, the National Economic and Development Authority (Neda) said.

To temper the increase in food prices and utility rates, Neda is enjoining the government to fast-track the implementation of its roadmap for El Niño while also preparing for a potentially “strong” La Niña next year, Neda Deputy Director General Rolando G. Tungpalan said in a statement on Friday.

“The government should err on the high side in determining food import requirements in anticipation of El Niño to avoid food price spikes, which would be very detrimental to the poor who spend over 60 percent of their budget on food,” Tungpalan said.

The plan to increase the importation of food staples, such as rice, forms part of the proposed Roadmap to Address the Impact of El Niño (Rain), which is aimed at mitigating the dry spell’s impact on food supply and prices while providing assistance to farmers and households in adversely affected areas.

Neda Director General and Economic Planning Secretary Arsenio M. Balisacan earlier said the government may have to import an additional 1.3 million metric tons of rice in addition to the 500,000 metric tons already ordered for the first half of next year. But the Neda chief said they could still scale down their recommendation since “rice production in this quarter and the first semester of next year are likely going to be more favorable than we expected.”

“We will still import [more rice] because … production is still expected to be lower than normal, and I think that would keep the total stock to just 67 days. We need to keep stock that could last for 90 days,” Balisacan had said.

On Friday, the government reported inflation had already bottomed out this year, rising to 1.1 percent in November from a record low of 0.4 percent in the previous couple of months.

“Higher local demand and the lingering effects of typhoon ‘Lando’ accounted for the price increases in meat and vegetables, while ample supply sustained the lower price of rice,” Tungpalan said.

The rise in headline inflation last month lifted the year-to-date figure to 1.4 percent, which remained below the government’s 2015 target of 2-4 percent.

“Despite the uptick in November, average inflation will likely settle below the low-end target for the year. This will largely be influenced by the slump in global petroleum prices, along with other favorable supply-side factors such as the sluggish domestic retail prices of corn, oil and rice,” Tungpalan said.

Besides food inflation, the government should also address risks to electricity prices, as Tungpalan noted an “unstable energy situation in Mindanao, given its large dependence on hydropower plants.”

As La Niña is expected to immediately follow El Niño by the middle of next year, the government should likewise be ready to address the risks posed by a prolonged rainy season, the Neda official said.

“The current drier than normal conditions must be taken advantage of to build flood mitigation infrastructures,” he said.