External pressures seen to keep inflation above gov’t forecast

While the government has already moved to arrest the rise in food prices, especially of pork, by flooding the market with imports, elevated commodity prices worldwide would keep inflation above the government’s 2-4 percent target range for the rest of 2021, Metrobank Research said on Wednesday.

“From where we are right now, signs of sustained rise in global commodity prices, and in turn, global inflation are picking up. Worries over supply shortages and logistical deadlocks in commodities such as semiconductor, steel, lumber, among others, have been reported as companies look to be in a panic-buying mode just to replenish their stockpiles and keep up with the increasing consumer demand,” Metrobank research analyst Pauline Revillas said in a report.

Revillas noted that the United Nations’ Food and Agriculture Organization (FAO) in April had reported 11 straight months of rising world food prices, with the FAO’s food price index hitting its highest since May 2014.

“Agriculture markets are seeing a tightening in supply as China is heavily restocking drawn-down domestic inventories. China has also been the key to the broad-based rally seen across metals. The Chinese government’s aggressive stimulus measures launched at the height of the pandemic last year helped revive the country’s construction activity,” Revillas explained.

“Also, the United States’ massive infrastructure spending plan is providing support for higher metal prices,” she added.

As for oil, Revillas said that while Brent crude futures rose to $70 per barrel in April, global oil prices could again fall due to expectations of bigger Organization of the Petroleum Exporting Countries supply during the next quarter plus renewed lockdowns across the globe amid a resurgence in COVID-19 infections, especially in Asia.

As such, Revillas said that while pressure from domestic supply issues might be abating, upward pressure from rising global inflation would likely come into play.

“We might see domestic inflation remaining within the 4-percent level for most of the year,” Revillas said.

The Bangko Sentral ng Pilipinas had been more optimistic as it projected this month the rate of increase in prices of basic commodities to end 2021 within-target, at 3.9 percent.

A separate report of think tank Moody’s Analytics showed that the Philippines’ headline inflation rate of 4.5 percent as of April was the highest among 14 Asia-Pacific economies.

“The Philippines and India are testing central-bank target rates with inflation driven in good part by rising food prices, which should ease as policymakers address import constraints for pork in the Philippines and transportation problems in India,” Moody’s Analytics said.

Moody’s Analytics projected the Philippines’ inflation rate to average 4.8 percent this year before easing to 3.2 percent next year. —Ben O. de Vera