La Niña seen worsening inflation woes in PH | Inquirer Business

La Niña seen worsening inflation woes in PH

Rising prices top challenge facing policymakers, says Moody’s Analytics

The possibility that the La Niña phenomenon will linger until the end of the year may add to upward pressure on inflation in the Philippines, even as prices of basic commodities are seen starting to peak.

The latest advisory from Climate Prediction Center (CPC) at the United States National Oceanic and Atmospheric Administration shows that the weather phenomenon, which brings above normal rainfall to the Philippines and threatens agricultural output, is favored to continue through the end of 2022.


There is a 52-percent chance for a La Niña decrease [weakening] into the Northern Hemisphere late summer (July-September) before slightly increasing [strengthening] to 58 to 59 percent through the Northern Hemisphere fall and early winter,” the CPC said.

This warning was raised as the Food and Agriculture Organization (FAO) said global output of paddy rice or palay was forecast at 694.3 million tons, 3 percent above the five-year average.


Record outputs

“Record or near-record outputs are forecast in Bangladesh, Cambodia, India, Pakistan and the Philippines,” the FAO said.

“Near-average outturns are forecast in Thailand, China (mainland) and Vietnam,” the United Nations agency added, referring to two of the Philippines’ Southeast Asian neighbors and biggest sources of imported rice.

Heightened volatility

According to Moody’s Analytics, inflation remained the top challenge facing monetary policymakers across the world.

“The volatility in global commodity markets and an increasingly risk-averse trading environment are likely to sustain inflation well above comfort levels through this year,” Moody’s Analytics said.

“The months ahead will therefore see central banks continue to withdraw extraordinary pandemic-driven stimulus and tighten rates aggressively,” it added.

On the other hand, Pantheon Macroeconomics argues that the rate of increase in prices of basic commodities is showing signs of reaching a peak.

The United Kingdom-based firm said slower growth in the Philippines after the first quarter—caused by slower government spending due to election-related restrictions— will also help bring down inflation.


Pantheon Macroeconomics noted that the Bangko Sentral ng Pilipinas “sounded downbeat” on the prospects for economic growth this year, citing the “weaker-than-expected global recovery and the possible reimposition of local COVID-19 restrictions amid an uptick in infections.”

Last week, BSP Governor Benjamin Diokno cited these factors as sources of risks that inflation may go faster in the coming months. INQ

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TAGS: Business, Inflation
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