Uninterrupted supply chain necessary to keep prices down

MANILA, Philippines — Inflation may ease further in the coming months as long as the supply chain of basic commodities remains uninterrupted amid the enhanced community quarantine , according to Finance Undersecretary Gil Beltran.

In his latest economic bulletin,  Beltran said the April core inflation  continued to slow down to 2.8 percent from three percent in March, “indicating easing inflation in the next few months.”

“Still, it is important that in this time of enhanced community quarantine, the supply chain of basic goods and other necessary items, while subject to the requirements of public health, should not be broken,” Beltran said.

Core inflation measures the change in average consumer prices, excluding certain items with volatile price movements, according to the Bangko Sentral ng Pilipinas (BSP). It is often used as an indicator of the long-term inflation trend as well as future inflation.

Like core inflation, the headline inflation rate in April moderated to 2.2 percent from 2.5 percent in March and three percent in April 2019.

“This further easing in general prices is largely due to non-food items, which more than offset the acceleration in food prices,” Beltran said.

He said the price increase of non-food items decelerated to 0.7 percent in April from 1.59 percent in the previous month, following the slump in global oil prices which drove down domestic pump prices and transport costs.

On the other hand, food inflation rose to 3.4 percent in April from 2.6 percent in March, mainly due to the uptick in the prices of vegetables and rice.

“Since November 2018, the average rice prices has been falling (such that month-on-month rice price change was negative) until March before registering positive month-on-month price change in April,” Beltran noted.

The DOF’s chief economist said month-on-month inflation contracted for the third straight month   at negative 0.08 percent in April.

Earlier, Acting Socioeconomic Planning Secretary Karl Chua said the deceleration in the headline inflation rate reflects the stability of the supply of basic commodities in the country.

However, he said the stability of prices is threatened by the recent spike in the global prices of rice because of supply disruptions amid the pandemic.

BSP Governor Benjamin Diokno, for his part, said the April inflation rate is consistent with the central bank’s prevailing assessment that inflation is expected to be benign over the policy horizon due to the adverse impact of the coronavirus pandemic on the domestic and global economy.

The central bank expects inflation to average two percent this year before accelerating to 2.5 percent next year, as the  economy is likely to follow a U-shape recovery path.