April 2014 Inflation - Philippines

MANILA—The National Economic and Development Authority (NEDA) expects the movement of prices of basic commodities to be manageable in 2014, and that the government is addressing upside risks to inflation.

This statement came after the Philippine Statistics Authority (PSA) reported that last month’s headline inflation registered at 4.1 percent from 3.9 percent in March 2014 and 2.6 percent in the same period a year ago. Inflation in the first four months of 2014 also stood at 4.1 percent.

“In the absence of major economic shocks, NEDA expects the country’s headline inflation rate in 2014 to average around 4.0 percent. This is within the government’s target of 3 to 5 percent as set by the NEDA Board-Development Budget Coordination Committee (DBCC),” said Economic Planning Secretary Arsenio M. Balisacan.

The NEDA Secretary explained that economic activity in the Philippines will remain strong despite global concerns on the sustainability of growth in emerging economies that placed heightened uncertainty on financial markets.

“Our economic activity will go forward, supported by sound macroeconomic fundamentals, favorable consumer and business sentiment, and manageable inflation,” said Balisacan.

According to the PSA, the 4.1-percent inflation in April 2014 was due to faster increments in the prices of food, electricity and petroleum products.

“Tightness in the country’s rice supply persisted last month, resulting in higher prices of rice during the period. Similarly, the relatively higher corn prices may be attributed to lower production of corn resulting from dry spells in a number of corn-producing regions,” said Balisacan.

The Cabinet official added that rising crude prices in the world market pushed up the prices of domestic petroleum products.

“The domestic prices of unleaded gasoline, diesel, kerosene and LPG recorded faster adjustments last month. These are also consistent with the Dubai crude price, which increased by 3.0 percent in April 2014, coming from a 1.2-percent annual contraction in the previous month,” said Balisacan.

As for electricity prices, Balisacan noted that the generation charge of MERALCO increased by 9.5 percent in April 2014, or by PhP0.51 per kilowatt hour year-on-year, from only 0.4 percent in March 2014.

“This was due to higher power costs from suppliers resulting from the several outages in large power plants, coupled with the increase in demand caused by the summer season,” said the NEDA official.

Balisacan said that the government needs to concentrate in addressing the upside risks to inflation, especially of food, to ensure that government measures would support economic growth. He said that these risks include potential increases in food prices that may emanate from weather disturbances such as El Niño, the depreciating peso and the pending petitions for further adjustments in utility rates, transport fares, and wages.

“In the short term, the interventions can focus on improving the management of inventory, including that of imports, and the efficiency of the distribution systems. In the medium term, we need to focus on increasing the productivity of agriculture and the food processing industries as well as expanding production capacity,” he said.