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Spike in July inflation ‘expected,’ says Palace

BSP: Emergence of 'Second-round' effects put greater pressure on inflation
03:51 PM August 05, 2022

MANILA, Philippines — The rise in the inflation rate in July was expected,  the Palace said Friday.

Press Secretary Trixie Cruz-Angeles said this after the Philippine Statistics Authority (PSA) reported that inflation last month accelerated to 6.4 percent, the highest since October 2018.

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“I understand that these were projected even before, given the inputs based on international events that have led to the increase in the prices of petroleum. So all of these had been factored in  and, in fact, even mentioned in the State of the Nation [Address] of the President,” Cruz-Angeles said in a press briefing.

” We have expected this. We’ll just wait until it evens out and the details of which should be asked of the [Department of Finance],” she added.

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The DOF will release an official statement regarding the inflation rate, Cruz-Angeles said.

The July inflation rate also reflected the so-called “second-round” effects such as increased wages and higher transport fares.

The Bangko Sentral ng Pilipinas on Friday said the emergence of these so-called “second-round” effects, which rippled out from the price shocks in the global crude oil and non-oil — food and fertilizer, in particular  — markets mainly caused by the Russia-Ukraine war, was putting greater upward pressure on prices of basic goods and services.

The BSP added that, along with these factors, expectations among businesses and investors that inflation would remain high was adding heat to the rise in prices.

Data from the Philippine Statistics Authority show that inflation has been rising month after month from 3 percent in February.

The latest readout brought the seven-month or January-July average to 4.7 percent, higher than the BSP’s goal of shepherding inflation to within the range of 2 percent to 4 percent.

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Central bank officials have earlier expressed resignation that the full-year average inflation for 2022 will be higher than the upper end of the BSP target range, which is 4 percent.

Based on the  latest BSP forecast, inflation is expected to remain high in the remainder of this year, but is expected to ease in 2023 and settle within target in 2024.

National Statistician Dennis Mapa said in a briefing the biggest contributors to increased inflation in July was the food and non-alcoholic beverage basket of goods, particularly chicken meat, fish, sugar and bread.

“A second group of commodities that showed faster inflation in July is the transport index, because of the continuous rise in the prices of gasoline, diesel, and road transport, especially jeepney fares,” Mapa said.

Meanwhile, the sub-group “housing, water, electricity, gas and other fuels” — while registering slower increases in prices — still contributed to higher inflation in July because of greater costs of electricity, housing rent, and cooking gas or liquefied petroleum gas.

Due to these same factors, Mapa said inflation felt by the poorest 30 percent of households in the Philippines revved up to 5.9 percent in July from 5 percent in June and from 4.4 percent in July 2021.

January to July inflation for the bottom 30 percent of households was at an average of 4 percent.

According to Economic Planning Secretary Arsenio M. Balisacan, the government is focused on ensuring that food is affordable and supplies are secure to arrest a further rise of inflation.

“We are also helping reduce energy, transport, and logistics costs, especially for vulnerable sectors of our population,” Balisacan said. “It is our urgent priority to ease price pressures and protect the public’s purchasing power through the implementation of programs that will help Filipinos cope with the effects of higher inflation rate.”

According to the PSA’s Mapa, the Philippine peso was worth 86 centavos in July compared to its value in 2018 — the base year in computing inflation. It was 87 centavos in June.

“Of course, the purchasing power of the peso decreased because inflation increased,” Mapa said.

Balisacan noted that the Department of Budget Management had approved the P4.1-billion second tranche of the Targeted Cash Transfer Program, intended to help cushion the impact of rising prices on more than four million Filipino families who belong to the poorest households in the country.

Balisacan said that since oil prices remain elevated, the government would  fast-track the distribution of the second tranche of subsidies for jeepney drivers and operators.

Along with this, the government will also accelerate the fuel cash subsidies for tricycle drivers together with the ongoing Libreng Sakay Programs of the Department of Transportation and the Office of the Vice President, as well as the approved MRT-3, LRT-2, and PNR Libreng Sakay for Students of the Office of the President.

Further, more than 158,000 eligible farmers and fisherfolk are set to receive P3,000 each as fuel discounts to help cushion the impact of higher fuel prices.

With the latest inflation readout, the party-list group Anakpawis lamented the Marcos administration’s continued refusal to suspend the excise tax and value-added tax on oil products.

Anakpawis national president Ariel Casilao said in a statement the latest figures justified their call for cash assistance of P15,000 per farmer and fisher household.

Citing data from allied group Kilusang Magbubukid ng Pilipinas, Casilao said oil price hikes had added P8,000 to the cost of palay production since March. Also, the fisherfolk group Pamalakaya said fishing costs had increased by P3,800 in a month.

READ: https://business.inquirer.net/355893/july-inflation-hits-6-4

READ: https://business.inquirer.net/355924/philippine-july-inflation-highest-since-2018

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TAGS: consumer prices, economy, inflation rate, Interest rates‎
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