BSP sees October inflation still below 1%

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) sees inflation still falling below one percent in October amid the minimal impact from the damage caused by Typhoon Lando that battered provinces in northern and central Luzon.

BSP Governor Amando Tetangco Jr. said inflation is likely to remain low and settle within 0.1 percent to 0.9 percent for October as the impact of Lando would be wiped out by lower gasoline prices and cheaper power rates.

“Transitory uptick in food prices in Lando-affected areas, higher LPG and diesel prices could be offset by downward adjustments in power rates and regular gasoline prices,” Tetangco said.

The National Disaster Risk Reduction and Management Council (NDRRMC) earlier placed the cost of damage to agriculture and infrastructure caused by Typhoon Lando at more than P9 billion.

“We haven’t really gotten the final report but based on some preliminary numbers that we have heard it doesn’t look like the impact is going to be very significant,” he told reporters.

Inflation eased to a new record low of 0.4 percent in September from 0.6 percent in August on the back of stable food prices and cheaper utility rates. This brought to 1.6 percent the average inflation in the first nine months from 4.4 percent in the same period last year.

The BSP has set an inflation target of between two and four percent for this year.

“Besides we have significant room in our inflation target because we are below the lower bound of the target. I don’t see any concern at this point,” the BSP chief said.

ING Bank Manila senior economist Joey Cuyegkeng said the impact of the damages caused by Typhoon Lando on inflation is minimal but the government should brace for the impact of the severe El Niño weather condition.

“Inflation impact is also limited. The risk to inflation remains with El Niño. The low global commodity prices especially oil prices would offset the impact of the typhoon on food prices,” he said.

He added October or November inflation is likely to capture the higher food prices for Metro Manila, while declaration of state of calamity in the directly affected areas in north Luzon would likely result to mild inflation pressures.

“We expect October inflation to hover around 0.5 percent to 0.6 percent. El Niño implication to prices remains the major concerns for BSP,” Cuyegkeng said.

Meanwhile, Tetangco said the BSP is set to tweak its forecasts for various streams of foreign income particularly trade and investments amid the volatility caused by the global economic slowdown as well as the impending interest rate hike in the US.

“We will look at all components but changes might be at trade and maybe portfolio investments,” he added.

According to him, the revision to the projected $2 billion balance of payments (BOP) surplus is still being finalized.

“We are finalizing the revisions. Trade might be changed because of the actual performance in the first nine months. The overall trend will remain, there will be a current account surplus and the overall BOP position will be positive,” he said.