DOF: Low inflation fertile ground for PH economic comeback

The prevailing low inflation environment in the Philippines will boost the government’s ongoing efforts to pump prime economic growth in the second half of this year to make up for its previous lackluster performance, according to fiscal authorities.

In a statement, Finance Undersecretary Gil Beltran also noted the strong possibility the increase in prices of basic goods and services would remain capped in the 1-percent zone until October before recording the traditional uptick during the Christmas season.

“Slower inflation will give room for government to aim at higher gross domestic product (GDP) growth,” said the official, who is also the chief economist at the Department of Finance (DOF). “Meanwhile, the catch-up plan for implementing infrastructure projects will boost public investment growth in the second semester and push the economy closer to the 6-7 percent GDP growth goal.”

After the budget delay-induced growth slowdown early this year, the DOF has redoubled its efforts at spending for the Duterte administration’s infrastructure buildup program. The low inflation rate will help initiate this by giving the central bank leeway to cut interest rates further that will, in turn, encourage the private sector to spend more on growth-boosting activities.

On Thursday, the government announced that prices of basic goods and services rose at their slowest pace in almost three years in August as the effects of the Duterte administration’s anti-inflation measures—especially the controversial rice tariffication law—began to take root across the economy.

According to the Philippine Statistics Authority, headline inflation rate decelerated further to 1.7 percent last month, marking the lowest consumer price index level since the 1.8 percent recorded in October 2016.

The August inflation rate was also lower than the 2.4-percent average price increase in July and the 6.4 percent in August of last year. This brought the year-to-date average price increase to 3 percent, the midpoint of the 2-4 percent target range, Beltran noted.

The decline in inflation was traced to the lower rate of increase in the prices of both food and nonfood items.

“Rice price, in particular, clocked its largest year-on-year decline of 5.2 percent,” he said, adding that lower international energy prices also translated to a decline in domestic fuel and electricity prices and transportation costs.

“Inflationary momentum also appears to be weaker as shown by the lower core inflation and month-on-month price change,” Beltran explained.

Core inflation eased to 2.9 percent for the month while the overall consumer price increased by 0.17 percent month-on-month in August, less than the 0.25-percent month-on-month increase in July. —DAXIM L. LUCAS