After declining continuously the past five months, the government yesterday reported that the country’s inflation accelerated to 4.0 percent in March 2022 from 3.0 percent the previous month as global oil prices continue to surge.
This brings the national average inflation from January to March 2022 at 3.4 percent. In March 2021, inflation was higher at 4.1 percent.
The Philippine Statistics Authority said increases in the indices of food and non-alcoholic beverages; housing, water, electricity, gas and other fuels; and transport “contributed largely to the upward trend of the overall inflation during the month.”
Higher annual increments were also observed in the following commodity groups: alcoholic beverages and tobacco; furnishings, household equipment and routine household maintenance; information and communication; and restaurants and accommodation services.
Benjamin Diokno, Bangko Sentral ng Pilipinas (BSP) governor, said average inflation could breach the upper end of the 2 to 4 percent target range this year.
“Nevertheless, (it) is projected to decline and settle within the target band at 3.6 percent in 2023. Inflation expectations have likewise risen, but continue to be anchored to the 2-4 percent target band,” Diokno said.
He stressed that the economic consequences of Russia’s invasion of Ukraine “have become a significant headwind in global economic recovery.”
“In particular, the Russia-Ukraine conflict could affect the Philippines through slower world GDP (gross domestic product) growth, higher crude oil prices, higher world non-oil prices, and potential second-round effects on inflation through transport fares, wages, and food prices. Among all these, the main channel through which the Russia-Ukraine war could affect the Philippines is through higher oil prices,” Diokno said.
“Under these circumstances, the BSP will closely monitor the emerging risks to the outlook for inflation and growth, and remain vigilant against possible second-round effects from supply-side pressures or any shifts in the public’s inflation expectations,” he added.
Diokno said the BSP “continues to have a wide arsenal of policy instruments to respond to possible adverse impact of external shocks.”
Even while upside risks to inflation have increased as higher oil prices due to geopolitical tensions start to impact local commodity costs, the policymaking Monetary Board last month decided to maintain for the 11th consecutive session the key rates of the BSP.
The overnight reverse repurchase facility remains at 2.0 percent. The interest rates on the overnight deposit and lending facilities were likewise kept at 1.5 percent and 2.5 percent, respectively.
Diokno said the Monetary Board sees scope to maintain the BSP’s policy settings “in order to safeguard the momentum of economic recovery amid increased uncertainty, even as it continues to develop its plans for the gradual normalization of its extraordinary liquidity measures.”
“The BSP likewise supports the timely implementation of direct non-monetary measures by the government to mitigate the impact of the Russia-Ukraine conflict on global oil and non-oil commodity prices. Previous episodes of supply-side shocks in the country have shown that these are best addressed through timely non-monetary policy interventions that could ease directly domestic supply constraints and prevent second-round effects on prices,” Diokno said.
Karl Kendrick Chua, socioeconomic planning secretary, said the government has taken steps to address the inflationary pressures brought about by the Russia-Ukraine conflict.
“We have been proactively monitoring the impact of the Russia-Ukraine conflict. As early as March 7, the Economic Development Cluster (EDC) has already proposed interventions to manage the impact on the economy and the people,” Chua said.
The EDC’s policy interventions to manage supply and prices of key commodities include the following: expanding supply and reducing prices of pork by extending the lower tariff of 15 percent in quota and 25 percent out quota; accelerating the release of imported pork from cold storages; passing the proposed Livestock Development and Competitiveness Law; accelerating the release of Sanitary and Phytosanitary Import Clearance; and removing all non-tariff barriers.
Chua also said to cushion the impact of rising prices, the government will distribute unconditional cash transfers worth P500 per month to the poorest 50 percent of households.
Around 115,000 public utility vehicle drivers and operators have received P6,500 each under the Pantawid Pasada program.
“The government stands ready to support consumers, commuters, public transport drivers and operators, and agricultural producers to ease the impact of high oil and commodity prices. As COVID-19 cases subside, we also aim to move the entire country to alert level 1 to provide more opportunities for Filipinos to earn and provide for their families amid inflationary pressures,” said Chua.
