High inflation seen spilling over to January 2021

Faster inflation above the midrange of the government’s target likely spilled over to January such that the country’s chief economist said the government would ease the price burden that made it harder for Filipinos to spend on essentials like food amid a prolonged fight against COVID-19.

The majority of the 14 economists polled by the Inquirer last week said the rate of increase in prices of basic commodities stayed above 3 percent year-on-year last month, with forecasts ranging between 3.1 percent and 3.8 percent.

The government will report on the January inflation rate on Friday, Feb. 5.

During a briefing with the Foreign Correspondents Association of the Philippines on Friday, Acting Socioeconomic Planning Secretary Karl Kendrick Chua said the government had taken a proactive stance to tame faster food inflation after the onslaught of six typhoons before 2020 ended.

“We know that opening the economy—in particular, liberalizing the access to key food products—helps the people,” said Chua, who heads the state planning agency National Economic and Development Authority (Neda).

While rice tariffication already slashed prices of the Filipino staple food by about P10 a kilo, Chua said the government through the Tariff Commission would look into further bringing down duties on pork and rice through public hearings scheduled on Thursday, Feb. 4.

Chua said easing food importation would help rein in rising food inflation to keep the headline rate within the 2-4 percent target for 2021.

As for the January inflation rate, ING’s Nicholas Antonio Mapa and Security Bank’s Robert Dan Roces had the highest forecast of 3.8 percent year-on-year, which Mapa mainly blamed on “price gains emanating from the food basket—the reason for the continued pickup in the headline number.”

“Follow-on pressure on prices of fruits and vegetables induced by supply shortages tied to storm damage will be around in January with supply conditions only expected to normalize after the next harvest. This is one reason for food price gains to be ‘sticky downwards’ with inflationary pressures taking a longer time to dissipate,” Mapa said.

Roces, for his part, also pointed to pork supply lack due to the African swine fever scare as well as back-to-back increases in pump prices plus higher electricity rates.

The other January inflation forecasts were 3.6 percent for Ateneo de Manila University’s Alvin Ang, BDO’s Jonathan Ravelas, and Sun Life’s Patrick Ella; 3.5 percent for ANZ’s Sanjay Mathur and RCBC’s Michael Ricafort; 3.4 percent for HSBC’s Noelan Arbis and UnionBank’s Ruben Carlo Asuncion; 3.3 percent for Capital Economics’ Gareth Leather and Nomura’s Euben Paracuelles, and 3.1 percent for University of Asia and the Pacific’s Victor Abola.

For the full-year of 2021, Citi’s Nalin Chutchotitham expected headline inflation climbing to 3.3 percent—hence “may require some caution,” while Oxford Economics’ Makoto Tsuchiya projected 2.8 percent.

Inflation closed 2020 at an average of 2.6 percent, up from 2.5 percent in 2019, as monthly rates climbed above 3 percent in November and December following a string of strong typhoons that curbed agricultural output.

The poor suffered more and shelled out bigger amounts as consumer prices rose at a faster pace of 2.9 percent in 2020 among the bottom 30-percent income households. Ben O. de Vera