MANILA – Headline inflation rate in August 2014 settled to 4.9 percent, the same as in July 2014, according to the National Economic and Development Authority (NEDA). Increases in the price of food and electricity pushed up inflation, while prices of other commodities remained relatively stable.
Food inflation increased by 8.3 percent in August 2014 resulting from faster year-on-year growth in almost all major food items during the period.
“Food prices, while expected to remain elevated, are seen to normalize as government steps up its rice importation,” said Economic Planning Secretary Arsenio M. Balisacan.
He added that the commencement of the harvest for main season corn, which is expected to be completed by mid-September, is seen to provide additional buffer to supply.
“Given the potential upside pressures linked to possible increases in food and oil prices and pending petitions for adjustments in utility rates, short term interventions should focus on ensuring supply sufficiency of key commodities,” said Balisacan, who is also NEDA Director-General.
He added that in the case of rice, timely importation to augment local production is warranted, given the expected 1.2 percent decline in domestic palay production in the second half of 2014.
“The relatively high probability of El Nino towards the fourth quarter of 2014 implies that the government should intensify efforts to implement programs that will help the areas which are highly and moderately vulnerable to the adverse impact of a dry spell,” said Balisacan.
He added that pest control measures such as the eradication of “cocolisap” should also be accelerated, given coconut products’ relatively strong linkage in the production of many food and non-food manufactures for domestic consumption.
Meanwhile, electricity rates rose as Meralco’s generation charge increased by PhP0.59/kWh. Outages of power plants have led to supply shortfall, translating to higher cost of electricity generation. Also, the collection of universal charges (deferred in previous months) began in August 2014, thus contributing to the hike in power rates.
“Notwithstanding upward pressures on prices, the overall market expectations on inflation remain well-anchored,” said Balisacan.
He cited the effect of Monetary Board’s recent move to hike interest rates by 25 basis points to 3.75 percent for the overnight borrowing or reverse repurchase facility and 5.75 percent for the overnight lending or repurchase facility.
“Such policy action by the Bangko Sentral ng Pilipinas is expected to put a brake on potential price pressures,” said Balisacan.
Core inflation, which excludes selected volatile food and energy prices, accelerated to 3.4 percent in August 2014 from 3.0 percent in July 2014 and 1.9 percent in August 2013. But core inflation in the first eight months of 2014 remained subdued at 3.0 percent.
Also, year-to-date headline inflation rate stood at 4.4 percent, still within the Development Budget Coordination Committee’s inflation target of 3.0 to 5.0 percent for 2014.