Inflation soars to 4.5% in May 2014

According to the Institute for Development and Econometric Analysis, Inc. latest NewsBriefs, for May 2014, Philippine inflation rose to 4.5 percent, the highest rate registered since November 2011’s 4.7 percent. Inflation stood at 4.1 percent in April 2014, and 2.6 percent in May 2013. The surge was primarily driven by the heavily-weighted food and non-alcoholic beverages index, as well as the clothing, footwear, housing, water, electricity and fuel indices. The food index alone escalated to 7.1 percent. Meanwhile, core inflation, which excludes certain food and energy items, accelerated to 3.1 percent. Annual inflation in the National Capital Region went up by 3.8 percent while in areas outside NCR, it went up by 4.7 percent.

Per IDEA, the National Economic Development Authority, however, remains confident that in the absence of shocks, the government’s target of 3 - 5 percent inflation rate for this year will be attained. With the possibility of an El Nino episode in the next few months, ensuring supply sufficiency, especially food, will be key. Equally important, as NEDA’s Arsenio Balisacan said, is to maintain an inflation rate supportive of economic growth.

Also per same published report, the Philippine Statistics Authority reported that the country’s inflation rate accelerated to 4.5 percent for May 2014, driven mainly by the increase in food, electricity and petroleum prices. While last month’s inflation falls within the 3.9 - 4.7% range that the Bangko Sentral ng Pilipinas estimated, Governor Amando Tetangco stated that policy settings will be adjusted if necessary, as ‘the room to keep rates steady has narrowed’.

Moreover, the European Central Bank’s  announcement last week to undertake a series of measures to stimulate the Eurozone will factor into the Monetary Board’s June 19 policy meeting. During its May 8 meeting, BSP’s overnight borrowing, lending and special deposit account rates were kept steady at 3.5percent, 5.5percent and 2percent respectively. Meanwhile, the BSP will continue to monitor global investor sentiment and the domestic financial markets.

On the other hand, the United States Secretary of Commerce Penny Pritzker, along with American business leaders visited Manila to urge the country to join the proposed Trans-Pacific Partnership trade agreement which includes other countries in the Asia-Pacific region. During a dialogue between the Malacañang Palace and Secretary Pritzker, US investments could potentially flow into car manufacturing, energy, mass transit, tourism and infrastructures in Mindanao.

Lastly, the Philippines’ national debt rose to P5.64 trillion at the end of April, 6percent more than last year’s in the same period; domestic debt grew by 7.2percent while foreign debt grew by 4.5percent. Meanwhile, from January to April 2014, revenues from taxes levied on alcohol and tobacco products reached P23.016 billion, exceeding the period’s target of P21.74 billion. As sin taxes continue to be increased, total excise revenue is expected to hit P104.796 billion by the end of the year, according to the researchers of IDEA.

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