06 June 2017

MANILA – The National Economic and Development Authority (NEDA) states that the slower inflation rate in May 2017 bodes well for the country’s economy in the near term.

 The Philippine Statistics Authority (PSA), an attached agency of the NEDA, reported that headline inflation eased to 3.1 percent in May 2017 from 3.4 percent in the previous month.

 This is lower than market expectations of 3.3 percent, and is within government’s target of 2.0-4.0 percent for 2017.

 Slower price adjustments in both food and non-food commodities contributed to slower inflation in May 2017.

 Inflation for the food and non-alcoholic beverages subgroup eased to 3.8 percent from the previous month’s 4.2 percent. This is due to slower price adjustments in vegetables, fish, oils and fats, as well as sugar, jam, honey, chocolate and confectionery.

 Slowdown in the prices of vegetables, in particular, was attributed to the resilience of crops in northern Philippines that withstood unfavorable weather and frost earlier this year.

 However, other food commodities like fruits, meat and rice recorded faster price increases in May 2017. Rice inflation accelerated further to 2.4 percent.

 “These trends bear watching, given the significant impact of food prices on the poor. The amendment of domestic laws to reflect the expiry of the WTO waiver on rice quotas should also be pursued,” said Socioeconomic Planning Secretary Ernesto M. Pernia.

 Meanwhile, non-food inflation also slowed to 2.5 percent in May 2017 from 2.7 percent in April. This was driven by slower price adjustments for clothing and footwear, furnishing, household equipment, health, transport, communication, and recreation and culture.

 This follows the slower year-on-year increase in domestic petrol prices during the period.

 Slower inflation was also recorded for unleaded gasoline, diesel, kerosene, and LPG in May 2017 relative to the previous month.

 Pernia says that the country’s overall economic outlook remains bright considering recent international and domestic developments.

 “On the external front, growth prospects for the global economy have improved, and the expected recovery of international trade should provide ample supply of commodities to support domestic production,” said Pernia.

 He added that, on the domestic front, neutral weather conditions are likely to prevail over potential recurrences of El Nino or La Nina, based on the latest outlook of PAGASA and the International Research Institute for Climate and Society.

 This could lead to increased production of agricultural products, especially palay and corn.