The slower inflation combined with other factors will bolster economic growth in the last three months of 2019, according to the Department of Finance (DOF).
“The continuing drop in inflation has given economic authorities policy room to loosen liquidity, enabling a cut in the policy rate by another 25 basis points,” the DOF said in its economic bulletin released over the weekend.
“This plus a strong fiscal position coupled with efficient implementation of the catch-up spending program will boost economic growth in the last quarter of the year,” it added.
Inflation further moderated in September to 0.9 percent, the lowest since February 2016.
This brings average inflation rate for the first three quarters to 2.8 percent.
The DOF said deceleration in price is accounted for by both food and non-food items. In particular, rice and vegetable prices continued to drop. Likewise, meat and fish inflation slowed down due to base effects.
Non-food inflation is also tempered by the downward adjustment in electricity rates and the 0.13 percent year-on-year drop in Dubai crude petroleum price from $62 in September last year to $53 per barrel.
“For the rest of the year, assuming month-on-month price growth of at most 0.2 percent as in September, monthly inflation will be likely still below one percent in October before making upward corrections in the final two months,” the DOF said.
The National Economic and Development Authority (NEDA) said last Friday it expects inflation to further ease in the near term due to higher supply of rice in the country allowed by the Rice Tariffication Law.
“We see the Rice Tariffication Law continuing to help pull down overall inflation in the near term as it continues to help improve rice stock inventory of the country. This access to cheaper rice is good for Filipino consumers,” Ernesto Pernia, socioeconomic planning secretary, said.
“While consumers enjoy lower rice prices, we must at the same time protect the Filipino farmers from falling palay prices. The government must fast-track and prioritize programs and projects under the Rice Competitiveness Enhancement Fund to boost production and improve profitability of the Filipino farmers,” Pernia also said.
NEDA said a joint resolution to help protect the farmers from falling palay prices is pending approval in Congress.
The resolution directs several government agencies and local government units to buy rice from local producers for their rice subsidy programs.
The Department of Agriculture and the Philippine Competition Commission are also conducting an investigation on anti-competitive practices to ensure there is no collusion among millers and traders, and that rice prices are acceptable both for the consumers and farmers, NEDA said.
“We are also on the lookout for upside risks to inflation that may emanate from the reported cases of African Swine Fever in the country and volatility in international oil prices poses,” Pernia said.