DOF: Slower inflation, budget implementation to boost economic growth

MANILA, Philippines — Despite a slight uptick in inflation in May, the Department of Finance (DOF) expects easing price increases to support sustained economic growth moving forward, especially as the government finally spends the P3.7-trillion 2019 national budget after four months of delay.

In an economic bulletin Tuesday, DOF Undersecretary and chief economist Gil S. Beltran noted that headline inflation rose 0.17 month-on-month last month, slower than the 0.25-percent month-on-month rise in April.

However, the year-on-year rate of increase in prices of basic commodities inched up to 3.2 percent last May from April’s 3 percent “due to low base from a year earlier,” Beltran explained.
Beltran attributed the slower month-on-month inflation mainly to “continued stabilization of food prices, in particular, rice.”

“However, several food items including vegetables, fruits, and food products rose by 3.79 percent, 0.42 percent and 1.75 percent, respectively, due primarily to the El Niño phenomenon which dented production,” Beltran said.

As a whole, food inflation inched up 0.16 percent month-on-month even as the rates for rice, fish, and sugar declined 0.58 percent, 0.44 percent, and 0.17 percent, respectively, he added.
“This is due to the President’s memorandum orders streamlining the flow of food supply and the passage of the law liberalizing rice imports,” Beltran said.

Non-food inflation in May also eased to 0.18 percent month-on-month from 0.35 percent last April “as petroleum prices continued their ascent, with Dubai crude oil peaking at $72.84 per barrel from $70.95 per barrel in April, the highest since November 2018… due to the unexpected rise in US inventory.”

Moving forward, Beltran said inflation was “expected to recede further with crude oil prices moving to bear territory, with Dubai crude futures dropping below $60 per barrel as of June 6.”
According to Beltran, “below 4-percent inflation can be achieved for the rest of the year if the month-on-month price increase is at most 0.4 percentage points.”

The DOF official said, “slower inflation will continue to boost consumption spending.”

Headline inflation averaged 3.6 percent in the first five months, which is already within the government’s 3-4 percent target range.

Last year, the inflation rate hit a 10-year high of 5.2 percent due to elevated global oil prices, new or higher excise taxes slapped on consumption and food supply bottlenecks.

For Beltran, the expected increase in consumer spending amid easing prices coupled with the implementation of the 2019 budget since April “will enable the government to resume public construction growth and bring back the GDP [gross domestic product] growth above 6 percent in the quarters ahead.”

GDP expansion fell to a four-year low of 5.6 percent during the first quarter due to government underspending on public goods and services due to the impasse in Congress on this year’s appropriations as its two houses squabble over “pork” funds. (Editor: Eden Estopace)