Inflation in the Philippines may have accelerated faster at 3.3 percent year-on-year in February due to the lingering impact of the African swine fever (ASF) on food prices and as fuel price hikes continued, according to DBS.
The Singapore-based bank, in a research note penned by Taimur Baig and Ma Tieying, also said that while the crisis in Ukraine has jacked up international oil prices, the overall effects would not be dramatic as feared.
“We see upside pressures on headline figures driven by supply side [or] commodity factors,” the economists said.
They added that in the Philippines, faster inflation might have been driven by rising food prices partly due to the yet unresolved prevalence of ASF plaguing the hog raising industry and the unabated rise in fuel prices. Local oil companies are raising pump prices for the ninth week in a row today, March 1.
The Philippine Statistics Authority (PSA) pegged inflation in January at 3 percent based on 2018 prices, slowing down for the fifth month in a row from 4.4 percent in August 2021.
Reckoned from the previous base year of 2012, which the PSA used up to December 2021, inflation similarly eased month after month since 4.9 percent last August.
“Within-target inflation should allow the central bank to maintain its loose policy to support the economic recovery in the first semester of 2022, but policymakers made their first mention of policy normalization intention in their February meeting,” they added.
Maintaining policy stance
On Feb. 17, the Monetary Board (MB) said they deemed it prudent to maintain the Bangko Sentral ng Pilipinas’ (BSP) accommodative policy stance given a manageable inflation environment and emerging uncertainty surrounding domestic and global growth prospects. In that meeting, the BSP kept its overnight borrowing rate to a record low of 2 percent.
The MB said the BSP would continue to carefully develop its plans for the eventual normalization of its extraordinary liquidity measures “when conditions warrant.”
The Singaporean bank likewise said that while crude oil prices breaching the $100-per-barrel mark might grab the headlines, this was neither new nor a source of major stress for the global economy.
“Compared to past oil shocks, global energy intensity is relatively lower, which in turn lowers the sensitivity of global [gross domestic product] with respect to energy prices.”
An economy is more efficient when energy intensity, which represents how much energy is needed to come up with a given output, is low. INQ