Inflation seen to accelerate in months ahead

MANILA, Philippines—After dropping to a four-year low in August, inflation may accelerate in the months ahead due to rising global oil prices and depreciation of the peso.

But the faster pace of increase in consumer prices may remain manageable.

According to Socioeconomic Planning Secretary Arsenio Balisacan, rising prices of petroleum in the world market and the peso’s fall against the US dollar will soon impact on overall domestic prices.

The ongoing tension in Syria is said to be behind the rising oil prices in the world market. The Syrian government has been accused of using chemical weapons against rebels in the ongoing civil war.

Talks of a possible US military attack on Syria have fueled speculations of disruption in the oil supply from the Middle East, thereby pushing global oil prices.

Also, the depreciation of the peso has been tagged as the reason why capital is being drawn away from local shores.

Talk that the US Federal Reserve may soon scale down its bond purchases has also fueled the withdrawal of portfolio funds from emerging markets like the Philippines.

The peso last month fell to the 44-to-a-dollar territory, and has so far stayed in that level even as portfolio funds, largely stocks, continued to be pulled out of the country.

But Balisacan has expressed confidence that the impact of rising world oil prices and falling peso will not be enough to cause inflation to breach the ceiling set.

There is also the probability that inflation may go back to the 3-percent territory, he added.

“But even if inflation goes back to 3 percent, that will still be very manageable,” Balisacan said.

In August, inflation fell to a four-year low of 2.1 percent. This brought the average for the first eight months of the year to 2.8 percent.

The government has set the inflation target at a range of 3 to 5 percent for the year.

The benign inflation seen so far this year has been brought on partly by rising investments, which has helped boost the supply of goods and services.

Balisacan said that the country’s strong macroeconomic fundamentals have somehow helped temper inflation.

If not for the favorable fundamentals, he said, the peso’s fall would have been even more significant.