The Department of Finance (DOF) said the country’s low inflation will provide room for low interest rates, which will support the Philippines’ recovery from the coronavirus disease 2019 (COVID-19) pandemic-induced crisis.
The DOF pointed out in its economic bulletin over the weekend the inflation eased further to 2.3 percent in September from 2.4 percent in August, well within the target range.
“Low inflation will provide adequate room for low interest rates to support economic recovery as the country transitions to the new normal,” the DOF said.
The slowdown in the general price level is due mainly to food items, the DOF said, whose inflation rate dropped to 1.5 percent from 1.74 percent last month, overwhelming the uptick in price of non-food items.
The non-food cluster slightly picked up pace from 2.1 percent in August to 2.45 percent in September mainly due to transportation and utilities.
“Due to stable supply, free movement of goods and recent structural reforms, inflation in September was well below the midpoint of the central bank target at 3 percent,” Karl Kendrick Chua, acting socioeconomic planning secretary, for his part, said in a statement last week.
Chua emphasized that landmark reforms, such as the Rice Tariffication Law of 2019, enabled the country to withstand supply shocks that could have otherwise threatened overall price stability.
However, the onset of La Niña, the continued presence of African Swine Fever in the country, imposition of localized lockdowns and supply chain bottlenecks could pose upside risks to the low inflation environment.
“Concerned government agencies and local government units also need to strengthen the implementation of its phytosanitary and biosecurity measures and intensify its meat inspection efforts. This is to suppress the spread of potentially contaminated meat products, as new cases of African Swine Fever and Avian Influenza are reported,” Chua said.
He added the government could also explore and expand projects that will improve the country’s water management systems, distribute climate-resilient seed varieties, provide post-harvest facilities and ensure business continuity and delivery o f goods across the country, as these will all be important sectors to address the potentially adverse effects of the risks.
New waves of COVID-19 cases around the world and slower than expected economic recovery continue to put downward pressures on global oil prices, Chua said.
Despite this, Chua assured that the government is closely monitoring global price movements to remain ready to address any potential shocks.