Continuously rising prices of vegetables pose risk to inflation amid the dry spell due to El Niño, according to the Department of Finance’s chief economist.
“In the aftermath of Typhoon ‘Lando,’ vegetable prices have been rising by more than 10 percent since November last year. The above-average price increase may continue due to the dry spell,” Finance Undersecretary Gil S. Beltran said in an economic bulletin. To recall, “Lando” battered many parts of Luzon last October, damaging food crops in its path.
Last week, the government reported that inflation—or the average rate of increase in prices of basic goods—slowed to a four-month low of 0.9 percent in February.
“Despite the ongoing dry spell, the country managed to put food price inflation under control. Food price, on average, increased by only 1.5 percent, even lower than the 1.7-percent food price growth in January. Rice price, for example, declined by 2 percent [last month],” Beltran noted.
In the case of vegetables, however, prices were on the uptrend. “At nearly 10 percent, the growth in vegetable prices remains the highest among the commodities. The vegetables commodity sub-group accounts for about 3.2 percent in the CPI [consumer price index], yet it contributed 0.3 percentage point to [last February’s] overall inflation rate of 0.9 percent,” Beltran pointed out.
“While the overall price level appears stable, sector specific measures will have to be carried out. In this dry season, the agriculture sector is especially vulnerable,” Beltran said.
In particular, “innovative approaches to counter the dry spell may be necessary in vegetable-producing areas to dampen inflationary impact of supply tightness,” the Finance official said.
Separately, UK-based banking and financial services giant Barclays said in a report that “El Niño remains a risk for the [Philippine] economy, but lower oil prices are mitigating the impact on inflation.”
Amid a low inflation environment, Barclays said it expected the Bangko Sentral ng Pilipinas (BSP) to keep key policy rates steady throughout 2016.
“After 5.8-percent GDP [gross domestic product] growth in 2015, we see growth remaining healthy at 5.5 percent in 2016, but it will be weighed down modestly by external headwinds and lower government spending, given the change in administration,” Barclays said.
Overall, Beltran said “the continued overall price stability will give authorities larger room to maneuver to accommodate external economic shocks.”