By Beting Laygo Dolor | Contributing Editor
The Philippine economy experienced a better than expected bounce last June when inflation slid down to 2.7 percent. The slowing down of inflation is the best level in 22 months. The same time last year, inflation was pegged at 5.2 percent.
According to data from the Philippine Statistics Authority released at the end of last week, the June 2019 inflation rate was the lowest since the 2.6 level attained in August and September, last year.
At a press briefing held July 5, National Statistician Claire Dennis Mapa said prices of rice – the principle staple of most Filipinos – continued to decline. For June, rice prices went down by 1.7 percent year-on-year, continuing the nine percent decline that was achieved in the previous month.
Mapa credited the lower prices of rice to the implementation of the Rice Tariffication Law, which was implemented beginning March of this year. The law liberalized the importation of rice but imposed tariffs on all imports of the staple. As a result, cheap imports mostly from China began flooding the market, mostly selling at slightly more than half the cost of locally produced rice.
Besides rice, the prices of non-alcoholic beverages also slowed down.
The only consumer products that showed a high inflation rate were alcoholic beverages and tobacco, which rose by 9.3 percent.
Housing, water, electricity, gas and other fuels only rose by three percent, while household equipment and routine maintenance for households were slightly higher at 3.1 percent.
There was nominal inflation in the cost of transportation and communications
There was more positive news for Filipino families with the cost of education also experiencing a decline of 4.5 percent across the board. Students enrolled at state universities and colleges have been enjoying the free tuition program through a law that was passed last year and which took effect this school year.
Mapa told reporters that the country’s inflation rate surged in the middle of last year, breaching the five percent level, when higher excise taxes due to the TRAIN Law took effect. Global food prices were also elevated that same time, compounding the problem.
Finally, prices of rice were also higher in Metro Manila due to bottlenecks in delivery and distribution.
In the coming months, consumers can expect inflation to remain at the current “safe” level of between two to three percent.
With inflation easing, the Bangko Sentral ng Pilipinas (BSP) will have greater elbow room to ease fiscal policy.
BSP Gov. Benjamin Diokno said he will keep a close watch on the latest economic developments “to ensure that the monetary policy stance remains consistent with the BSP’s price stability objective.”
The lower inflation rate attained last month is seen to be maintained for the short term with no significant risks seen on the horizon.
Diokno is seen by the market as being pro-growth and is therefore expected to favor looser monetary policy. But he said that any action he will take as well as its magnitude will be “data dependent.”
The BSP is scheduled to announce its latest policy decision in August.
The BSP’s Monetary Board has kept the key interest rate stable at 4.5 percent and analysts foresee another cut of up to 50 basis points this year.
The BSP’s actions will result in more funds available to the market, thereby spurring greater growth. However, the BSP is expected to maintain a tight watch on the cash in circulation as too much cash can kick start higher inflation.
The boom in the sales of big ticket items like houses and lots, condominiums and motor vehicles is expected to be sustained for the short to mid-term.