April inflation down; BSP easing seen

Inflation eased to a five-month low of 2.2 percent in April as transport costs plunged following the enhanced community quarantine that limited mobility and the slide in global oil prices, but food prices picked up due to supply chain disruptions.

The Philippine Statistics Authority (PSA) on Tuesday reported that last month’s rate of increase in prices of basic commodities was the slowest since November last year’s 1.3 percent.

Given the benign inflation, the central bank said it had space to roll out additional measures to support the economy.

Bangko Sentral ng Pilipinas Governor Benjamin Diokno said the latest consumer price index was within its forecast range of 1.9 to 2.7 percent and was consistent with the agency’s prevailing assessment that inflation would be “benign over the policy horizon due to the adverse impact of the coronavirus pandemic on the domestic and global economy.”

As such, the BSP chief reiterated his “support for urgent and carefully coordinated measures with other government authorities to ease the spillover effects of the pandemic on people and firms, with a view toward preventing any long lasting economic and social damage.”

In addition to the monetary policy actions that have been announced, Diokno said the BSP stood ready to deploy any available measures in its tool kit as it continues to assess the impact of coronavirus pandemic on the domestic economy.

The central bank’s latest baseline forecasts indicate that inflation could settle at the low end of the government’s target range of 3 percent, plus or minus 1 percentage point, or at 2 percent for 2020 and 2.5 percent for 2021.

“Meanwhile, the domestic economy will likely follow a U-shaped recovery path,” said Diokno, who earlier noted that the Philippines would likely experience an economic contraction this year, punctuated by a recession spanning the second and third quarters.

From January to April, inflation averaged 2.6 percent, within the government’s 2 to 4 percent target range.

National Statistician Claire Dennis S. Mapa attributed April’s softer inflation mainly to the further decrease in the annual rate of the transport index by 6.1 percent, the lowest since October 2015.

“Specifically, annual decline was observed in petroleum and fuels for personal transport equipment at minus 28.6 percent in April, from minus 12.3 percent in March. The slower annual rate in housing, water, electricity, gas and other fuels also pushed down the overall inflation—specific items that recorded annual decreases were kerosene at minus 28.8 percent in April, from minus 13.9 percent in March 2020; LPG, minus 9.7 percent, from 3.6 percent; and electricity, minus 6.9 percent, from minus 7.2 percent,” Mapa said.

However, inflation for food and non-alcoholic beverages was faster in April at 3.4 percent year-on-year from 2.6 percent last March. INQ