Inflation rate in June will likely be higher than the 4.6 percent registered in May as food and oil prices remain elevated, according to five of the six economists polled by the Inquirer last week.
Of the six polled, one economist sees the rate of increase in prices of basic goods matching the May level.
The highest forecast was a 5-percent year-on-year increase in commodity prices projected by Standard Chartered Bank economist for Asia Chidu Narayanan.
“While May inflation was lower than expected, the trend of rising inflation continued for the fifth month. I expect inflation to edge up further until August. Food inflation, which moderated mildly in May, is likely to rise on higher fish inflation during the typhoon season. Fuel inflation will remain high on rising crude prices; the value-added tax hike on fuel has also only just been transmitted to transport prices,” Narayanan explained.
Narayanan said he was also expecting the “second-round impact” to kick in only in the second half of 2018, as higher transport prices pushed up supply-chain costs (transportation contracts are typically fixed semi-annually).
“Risks to inflation are to the upside, on higher oil prices and a weaker currency,” he added.
The peso had hit its 12-year lows against the dollar in recent weeks.
For Bank of the Philippine Islands vice president and chief economist Emilio S. Neri Jr., June inflation will likely rise to 4.8 percent.
“Despite falling power rates, petroleum prices headed higher again while prices of key food items in June did not sustain their downtrend last May,” Neri said.
The forecasts of University of Asia and the Pacific economics professor Victor A. Abola, ING Bank Manila senior economist Joey Cuyegkeng and Land Bank of the Philippines market economist Guian Angelo S. Dumalagan showed June inflation hitting 4.7 percent.
Dumalagan said the inflationary impact of the Tax Reform for Acceleration and Inclusion (TRAIN) Act was “starting to moderate” in June.
Signed by President Duterte in December, Republic Act No. 10963 or the TRAIN Law jacked up or slapped new excise taxes on, among others, cigarettes, sugary drinks, oil products and vehicles beginning Jan. 1 this year to compensate for the restructured personal income tax regime that raised the tax-exempt cap to an annual salary of P250,000.
“Despite normalizing price pressures from the recent hike in excise taxes, inflation may still increase slightly in June due to higher adjustments in the costs of oil and rice as well as the stronger depreciation of the peso. The recent trend in inflation, however, suggests that inflation is already starting to peak,” Dumalagan said.
The lone economist who projected steady inflation of 4.6 percent in June was Capital Economics Asia economist Alex Holmes.
“Oil price pressures have become the biggest driver of higher inflation over the past couple of months. At the same time, following a spike in the first quarter, food price inflation is now easing. We suspect that the two factors will roughly offset each other this month,” Holmes said.
“July will likely see inflation rising again on the back of another hike in cigarette duties. But it should start falling back soon thereafter,” Holmes added. —BEN O. DE VERA