Food inflation to worsen due to supply constraints

CEBU, Philippines — Supply constraints in the agriculture sector due to structural concerns and erratic weather will likely further push up food prices in the coming months.

Economists at the Bank of Philippine Islands (BPI) believe that even with increased importation, a decline in prices will not be guaranteed since prices of global food commodities are also rising at a very fast rate.

Additionally, there is also an issue on how fast the country can import given the disagreements and objections related to importation.

According to experts at BPI, upward pressure on local yields might persist given the existing and emerging inflationary pressures.

Supply disruptions have kept food prices elevated and could be vulnerable to a surge in transport costs, trade restrictions, and weather disturbances. Also, substantial Peso depreciation due to import expansion and hawkish Fed policy might force the central bank to make more adjustments in their policy settings.

Meanwhile, BPI continues to expect peso depreciation in the medium term as imports will likely increase further due to the recovery of the economy. Dollar demand may pick up and keep the exchange rate above the 56 level.

The possibility of tighter dollar supply may contribute further to peso depreciation.