The onslaught of Typhoon “Ompong” (international name: Mangkhut), which hit the country’s vegetable basket and pushed up prices, has jacked up inflation to a fresh high in more than nine years in September, economists said.
The headline inflation forecasts of economists polled by the Inquirer last week ranged from 6.4 percent to 6.9 percent.
A September inflation rate higher than 6.6 percent will be a new high from the 7.2 percent posted in February 2009.
The government will release the inflation report for September on Friday.
Bank of the Philippine Islands vice president and chief economist Emilio S. Neri Jr. projected a 6.9-percent year-on-year increase in prices of basic commodities in September and an even higher rate of 7 percent before yearend.
“We think peak print above 7 percent can come earliest in November despite the non-monetary and monetary measures to address both cost-push pressures and expectations. The delay in inflation’s turn is due to the sustained rise in global oil prices hitting a new four-year high in September while additional headwind on the supply front came in earlier this month,” Neri explained.
Maybank Investment Bank group chief economist Suhaimi Bin Ilias also sees headline inflation peaking at an average of about 7 percent in the fourth quarter.
In particular, Ilias expected a 5.5-percent average inflation this year “amid accumulation of inflation drivers aside from the TRAIN Law and weak peso, namely the typhoon effect ([Ompong] placed upward pressures on inflation rate between three and six months after it hit landfall) and fresh upside risk to crude oil price (10-percent rise in crude oil price can bump up inflation rate by as much as 45 basis points).”
Standard Chartered Bank economist for Asia Chidu Narayanan and Rizal Commercial Banking Corp.’s Michael E. Ricafort both projected inflation at 6.8 percent in September.
“The major catalysts for higher inflationary pressures in September are higher food prices especially rice (with nearly 10-percent weight in the inflation basket), weaker peso exchange rate against the US dollar (near 13-year lows), and higher global crude oil prices (near four-year highs) before US-led sanctions on Iranian oil exports start by November,” Ricafort said.
“Food items, especially rice, corn and other agricultural products, may have the biggest year-on-year price increments in September against August in the aftermath of Typhoon ‘Ompong,’ which has the second-biggest damage to agriculture after Supertyphoon ‘Yolanda’,” Ricafort added.
Narayanan sees inflation peaking at 7.4 percent in December.
“While rice has historically been a more important driver of headline inflation, fish prices are now playing a bigger role. We expect fish inflation to remain high in the near term, with typhoon ‘Ompong’ further curtailing already-reduced supply. This, along with still-high rice prices, may keep food inflation elevated despite government efforts. This is likely to keep upside pressure on headline inflation,” Narayanan said.
Meanwhile, London-based Capital Economics and Ateneo de Manila University economics professor Alvin P. Ang’s September inflation forecasts were both 6.7 percent, which the latter attributed to elevated food prices.
While other economists see inflation further picking up toward yearend, Ang said it could have had peaked in September, while remaining above 6 percent for the rest of the year.
Land Bank of the Philippines market economist Guian Angelo S. Dumalagan had the lowest forecast of 6.4 percent, similar to the rate in August, driven by sharp annual increases in the prices of fuel and rice as well as the depreciation of the peso.
“While our estimate shows a steady inflation reading this month, it would not be surprising if actual inflation comes out higher than expected given the negative impact of Typhoon ‘Ompong’ on agricultural production. The increase in the costs of food and non-alcoholic beverages likely remained elevated,” Dumalagan said.