July 5, 2019

Inflation in June 2019 eased to its slowest pace in 22 months, but we still need to caution against upside risks, including weather-related shocks and uncertainties in the global oil market.

The Philippine Statistics Authority reported today that the country’s headline inflation declined to 2.7 percent in June 2019 mainly due to continuing softer price adjustments in some commodity groups, especially food and non-alcoholic beverages.

This outturn brought year-to-date inflation to 3.4 percent, which remained within the government’s full-year 2019 inflation target range of 2.0 to 4.0 percent.

We continue to experience the effects of the administrative measures the government had set in motion starting late last year. Further, the implementation of the Rice Tariffication Law allowed the entry of ample imported rice into the country that helped bring rice prices down. Since the effectivity of the law, private traders have applied for the sanitary and phytosanitary import clearances of 1.26 million metric tons (MT) of rice imports from the Bureau of Plant and Industry. Of these, 576, 000 MT have already arrived in the Philippines as of June 7, 2019.

The recorded deceleration of inflation in rentals for housing, transport services, electricity, gas, and other fuels, and tobacco also contributed to last month’s inflation slowdown.

Meanwhile, inflation eased in almost all regions except MIMAROPA (Mindoro, Marinduque, Romblon, Palawan), which registered an accelerated rate of 5.2 percent from 4.7 percent in the previous month.

Region IX, or the Zamboanga Peninsula, posted the lowest inflation rate at 0.7 percent from 1.5 percent in the previous month. The price of education in the region continued to ease, still largely owing to the implementation of the Universal Access to Quality Tertiary Education Act.

Slower inflation comes with the optimism that the quality of life will improve along with the economy’s robust growth. The government will continue putting in place preemptive measures to mitigate the impact of weather-related shocks and uncertainties in the international oil market. The government will also implement measures to prevent the spread of the African swine fever in the country while moderating its effects on inflation.

We note that the prevalence of adverse weather conditions in the country remains an upside risk to inflation, especially with the start of the rainy season.

We should prepare for the possible onslaught of nine to 13 typhoons in the coming months, as well as the above-normal amount of rainfall brought by the southwest monsoon or habagat. On the other hand, the weak El Niño phenomenon has been forecast to persist until August 2019, with a chance to continue until the first quarter of 2020.

We reiterate our call to beef up production support and farm recovery programs in areas affected by El Niño. We also pitch for an assessment on the vulnerability and sustainability of farm areas to ensure that farming activities are adaptive to the environment and resilient to weather disturbances.