The increase in prices of major commodities accelerated in June as most businesses reopened after almost three months of being under strict quarantine measures imposed by the government to combat the coronavirus disease 2019 (COVID-19).
The Philippine Statistics Authority (PSA) yesterday said inflation went up to 2.5 percent in June, bringing the year-to-date average to 2.5 percent.
June’s outturn was faster than the 2.1 percent posted in May and April’s 2.2 percent.
PSA said the acceleration was due primarily to the “2.3 percent annual increment recorded in the transport index, specifically, tricycle fare index, from a 5.6 percent annual decrease in May 2020.”
“Annual increases in the indices of alcoholic beverages and tobacco at 18.5 percent; housing, water, electricity, gas, and other fuels at 0.4 percent; and communication also at 0.4 percent also pushed up the June 2020 inflation,” the PSA report showed.
PSA, however, noted food and non-alcoholic beverages, recreation and culture, education and restaurants exhibited slowdowns as a general community quarantine is still in place in major economic centers.
The June figure is within the 1.9 to 2.7 percent forecast range for the month set by the Bangko Sentral ng Pilipinas (BSP).
Benjamin Diokno, BSP governor, said the June figure is consistent with the BSP’s prevailing assessment that “inflation pressures remain limited due largely to the adverse impact of the Covid-19 pandemic on the domestic and global economic conditions.”
“The latest baseline forecasts suggest a benign inflation environment over the policy horizon. Inflation is expected to average at 2.3 percent for 2020, 2.6 percent for 2021, and 3 percent for 2022,” Diokno said.
“The BSP remains committed to use of monetary instruments and regulatory relief measures when needed further in fulfillment of its mandate to promote non-inflationary and sustainable growth. The BSP likewise reiterates its support for the health and fiscal programs already being rolled out by the National Government to support the needs of Filipino households and firms amid the pandemic,” he added.
Amid the pandemic, the BSP h deployed various measures to keep liquidity and credit flowing to households and businesses. These include the reduction in the overnight policy interest rate by a total of 175 basis points and lowering by 200 basis points of banks’ reserve requirements.
Diokno said domestic economic activity is projected to follow a “U- shaped quarterly recovery path” with output likely to contract further in the remaining quarters of 2020.
“Growth is expected to recover in 2021 once the impact of government policy support measures gains traction. Meanwhile, the outlook for the global economy has further deteriorated with considerable uncertainty brought about by the magnitude and duration of containment measures across all economies,” Diokno said.
Nicholas Mapa, ING Bank senior economist, said price pressures remain subdued “as demand remains crippled by record-high unemployment.”
“With year-to-date inflation at 2.5 percent, inflation is set to settle at the lower-end of the BSP’s 2-4 percent inflation target band and allow the central bank to keep an accommodative stance. However, with the BSP’s real policy rate now negative at -0.25 percent, we reiterate our expectation that the central bank will refrain from cutting policy rates further and look to additional liquidity enhancement measures should the economy need more stimulus,” Mapa said.

Karl Kendrick Chua, acting socioeconomic planning secretary, said the moderate increase in inflation will “help in the recovery of consumer demand as the economy gradually reopens.”
Although inflation is expected to remain within the target range of 2 to 4 percent this year, Chua said the government needs “to closely monitor possible upside risks to inflation as select economic activities are now resuming, although at reduced capacities.”
“We need to strictly monitor suggested retail prices on basic commodities to protect consumers from overpricing and against unscrupulous sellers and traders,” he added.
PSA report showed inflation in the National Capital Region (NCR) climbed further to 2.0 percent in June from 1.4 percent in May. Inflation in areas outside NCR also accelerated to 2.7 percent in June after four successive months of deceleration.
Among the regions outside NCR, the highest inflation during the month was observed in Region V (Bicol Region) at 4.3 percent, while the lowest was seen in Region VIII (Eastern Visayas) at 1.1 percent.