Low inflation seen in next 2 years

After enduring expensive consumer products and services in 2018, Filipinos can expect to experience the relief of stable prices over the next two years, thanks to government policies implemented in recent months, according to the central bank.

In a statement, Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo cited in particular the action of the Duterte administration to enforce import liberalization measures for price-sensitive food items that would result in lower inflation over the near to medium term.

“What was also pivotal in the antiinflation efforts was the decisive action of the government to immediately undertake nonmonetary measures [such as] the liberalized importation of key commodities including rice, fish, meat and sugar,” said Guinigundo who is also the central bank’s officer-in-charge this week while Governor Nestor Espenilla Jr. is abroad for medical treatment.

Guinigundo said the effective price-moderating efforts included the deployment of composite teams from various public agencies to prevent hoarding and profiteering that could have aggravated the excessive price run-ups of various food commodities.

Most importantly, an early implementation of the rice tariffication law and sustained reforms in supply logistics would help ensure “low and stable inflation” for this year and 2020.

“Our forecasts as of today remain at 3.2 percent for 2019 and 3 percent for 2020,” Guinigundo said. “With lower price movement, we could be optimistic about the growth prospects and their positive feedback to inflation.”

The central bank official also credited the aggressive monetary tightening implemented by the policy-making Monetary Board from May to November 2018, which was “aimed only at ensuring that the supply shocks from more than 60-percent increase in oil prices and the significant inflation rates of rice, fish, meat and vegetables did not evolve into sharp gains in wages, transport fares and prices of other services.”

“Without a monetary response, it would have been possible for inflation expectations to be disanchored beyond reasonable proportions,” he explained.

Last Friday, the government announced that the increase in the consumer price index for December fell to 5.1 percent, marking the second straight month of declining inflation after being on an uptrend for almost the entire 2018.

Despite the apparently downtrend in the inflation rate, the BSP deputy chief said regulators would “continue to confront the issue of inflation with appropriate and vigilant stance of monetary policy in recognition of the remaining risks both here and abroad without losing sight of the requirements of economic growth.”