Spike in food prices seen following ‘Yolanda’

Consumers can expect a slight uptick in commodity prices this month as a result of damage caused by typhoon Yolanda on key food-producing areas of the country, the Bangko Sentral ng Pilipinas (BSP) said.

However, the spike in prices, which may push up overall inflation for November and December, is expected to be temporary given moves of the national government to ensure that the effects of the typhoon is minimized.

“The government has been proactive in its preparation for this typhoon and everything that it brings,” BSP Deputy Governor Diwa C. Guinigundo said. “Much has been done, so the impact on rice (prices) might be limited.”

For his part, BSP Governor Amando M. Tetangco Jr. said the central bank was ready to provide assistance to areas where damage caused by Yolanda was greatest.

These measures include “regulatory forbearance (for banks) and liquidity support, as we have done in the past,” Tetangco told the Inquirer.

Meanwhile, Guinigundo said that Typhoon Yolanda came after the start of the main harvest season for most farmers. He said while many farmlands were likely devastated by the supertyphoon, most crops may have already been taken out of the ground.

Guinigundo, who heads the central bank’s monetary stability sector, said that while the government was able to put measures in place to prepare for the typhoon, damage to infrastructure and agriculture was inevitable.

He said this may cause tightness in the supply of goods that come from the affected areas and are consumed in other places of the country.

“Prices of basic commodities might be pushed somewhat higher, but the impact on whole-year inflation might be muted,” he said.

From a monetary policy standpoint, Guinigundo said the BSP’s inflation target for the year remained intact, indicating that current policy settings remained appropriate despite the expected spike in food prices in the remaining two months of the year.

The amount of money average households spend on food is the biggest component of the inflation “basket” tracked by the National Statistics Office (NSO).

The government, through its monetary policy tools that influence interest rates and the behavior of banks in terms of lending, has an inflation target of 3 to 5 percent for 2013 and 2014. The BSP expects inflation to average 2.8 to 2.9 percent for 2013, before accelerating to 4 percent in 2014.