Inflation slows to 4-month low of 0.9%

Cheap oil augured well to temper inflation in February to a four-month low of 0.9 percent, but economic managers warned yesterday of risks to jobs of Filipinos abroad if global oil prices continued their decline.

In a text message to reporters, Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. attributed the slower average rate of increase in prices of basic goods last month to declines in gas, housing, transport and utilities costs.

The actual rate was the low end of the BSP’s 0.9-1.7 percent forecast for the month as well as below January’s 1.3 percent and February 2015’s 2.5 percent.

Inflation last February was also the slowest pace since the 0.4 percent posted in both September and October last year.

Separately, Economic Planning Secretary Emmanuel F. Esguerra said in a statement that “persistent global oversupply and record stockpile levels of crude oil contributed to this softer inflation as prices of Dubai oil, Brent and West Texas Intermediate continued to weaken in January.”

Last February, prices of domestic gasoline went down 10.4 percent year-on-year; LPG, down 11.7 percent; kerosene, down 22.6 percent; and diesel, down 26.4 percent, according to Esguerra, who is also director-general of the National Economic and Development       Authority (Neda).

“Inflation in food items was also slower due to ample supply conditions,” the Neda chief added.

Esguerra attributed the softer food inflation to the “implementation of programs related to mitigating the impact of El Niño such as cloud-seeding operations, installation of alternative irrigation systems, crop rotation, the use of hybrid crop varieties and other government assistance for farmers, [which] helped ease price pressures on food.”

However, Esguerra noted of “potential negative impacts of continued decline in global oil prices on some categories of overseas Filipino workers” such as those engaged in oil exploration, construction, and clerical services.

“Given these developments, oil-producing countries may implement austerity measures, cut back on subsidies, postpone infrastructure outlays and impose higher taxes. Thus, the government should strengthen its ability to identify displaced workers and actively extend assistance by facilitating employment opportunities or placement services, retraining, providing livelihood, and reintegration,” Esguerra explained.

“We will continue to monitor price movements, including emerging second-round effects from global oil prices and any shifts in global growth prospects as these impact domestic growth and inflation dynamics and see if there is need to make any adjustment in policy levers,” Tetangco added.

Last month, the BSP cut its inflation forecast for 2016 to 2.2 percent from 2.4 percent previously, still within the 2-4 percent target range. Inflation settled at an average 1.4 percent in 2015, the lowest annual rate in almost two decades.