The spread of the novel coronavirus (2019 nCoV) may keep oil prices low as global demand of the commodity slides due to travel bans to and from China, in the process slowing tourism activities, the Department of Finance (DOF) said on Thursday.
In an economic bulletin, DOF Undersecretary and chief economist Gil Beltran said the downtrend in crude oil prices starting January could slow down inflation going forward.“Lower global economic growth due to the coronavirus outbreak will also reduce petroleum demand and thus, dampen inflationary pressures,” Beltran added.
In a Feb. 1 report, UK-based Oxford Economics said the recent drop in the oil price caused by lower fuel demand for travel and transportation was also a clear demonstration of the significant disruption caused by the 2019 nCoV outbreak.
Locally, the pickup in January headline inflation to an eight-month high of 2.9 percent year-on-year was mainly attributed to faster increases in transport costs and gasoline prices as well as higher excise slapped on sin products such as cigarettes, e-cigarettes and alcoholic drinks.
The third tranche of oil excise increases under the Tax Reform for Acceleration and Inclusion Act took effect on Jan. 1 alongside the implementation of two laws that jacked up sin taxes.
The higher rate of increase in prices of basic commodities last month was also partly a result of the eruption of Taal Volcano, which affected farms in the Calabarzon region and raised prices of beef, chicken, fish and vegetables.
“The uptick in the first month of the year could be traced to food and nonfood items alike. Food inflation is due to a select group of food items including meat, fish and vegetables, [which] as in 2019, logged in faster inflation than the average price increase, contributing 1.09 percentage point to inflation. Fish accounted for 0.6 of the price increase. Rice, however, tempered the effects of these other food items, reducing the inflation pressure by 0.64 percentage point,” Beltran explained.
As such, Beltran said food supply needed to be scaled up to reduce inflationary pressures.
“In a discussion with Finance Secretary Carlos Dominguez over the phone, Secretary William Dar of the Department of Agriculture agreed to adopt measures to boost food supply, especially now that the open season for fish has started,” Beltran disclosed.