Neda sounds alarm on possible El Niño return amid muted April inflation

CEBU DAILY NEWS FILE PHOTO/TONEE DESPOJO

A slower pace of price hikes for electricity, gas and food resulted in the inflation rate for April coming in at the same level of 3.4 percent as the previous period, the National Economic and Development Authority (Neda) said on Friday.

This inflation rate is slightly below the median market expectation of 3.5 percent and remains within the government’s target of 2.0 to 4.0 percent for 2017, the agency said.

At the same time, however, a ranking Neda official urged the government to brace for the possible return of the El Niño weather phenomenon where dry conditions usually result in poor crop yields, and therefore price spikes.

So far, normal rainfall pattern and neutral weather conditions expected from March to August 2017 bode well for the crops sector.

But Tungpalan warned that “with the potential recurrence of El Niňo, the government should start taking precautionary actions to mitigate the damaging effects of droughts and dry spells. These include production support, distribution of seeds, and timely importation.

He also urged the government to prioritize discussions on rice tariffs to avoid creating policy uncertainties.

“Additional interventions should also be taken to address those who will be negatively affected by the expected increase of rice imports,” he added.

As this developed, the Bangko Sentral ng Pilipinas said the latest inflation figure “confirms the manageable [price] outlook for the year.”

“At the moment, we deem the policy settings to be appropriate, but we continue to monitor changes in commodity prices particularly petroleum products as well as petitions for utility rate increases, which we see are possible risk factors to our baseline scenario,” BSP Governor Amando Tetangco Jr. said in a text message to reporters.

The level was within BSP’s forecast of 3-3.8 percent and brought the year-to-date average to 3.2 percent.

“The stable inflation rate in April is a respite from the upward inflation trend we saw in the first three months of the year,” Neda Officer-in-Charge and Undersecretary for Investment Programming Rolando Tungpalan said in a statement. “Nevertheless, volatilities in oil prices and erratic exchange rates can still manifest into higher domestic prices for both food and non-food commodities.”

Inflation in the non-food group decelerated from 2.8 percent in March to 2.7 percent in April 2017. Slower inflation in this segment can be attributed to the sluggish price adjustments of electricity, gas, and other fuels. This can be traced to the resumed operations of the Malampaya Gas Field after a two-month maintenance shutdown from January to February 2017.

Moreover, lower pump prices recorded for unleaded gasoline, diesel, kerosene, and liquefied petroleum gas in April 2017 contributed to slower non-food inflation.

Meanwhile, inflation in the food and non-alcoholic beverage group accelerated from 4 percent in March to 4.2 percent in April 2017. But partially tempering the increase in food inflation were fruits, vegetables, sugar, jam, honey, chocolate, and confectionery.

Prices of staples such as rice, meat, and fish remained high due to supply constraints. Data from the Philippine Statistics Authority (PSA) showed the country’s declining inventory of commercial and government rice.

“Possible increases in transportation fares and electricity rates in the coming months could also exert upward pressure on prices, along with the transitory impact of the proposed tax reform program,” the Neda official said.