In the view of the National Economic and Development Authority (NEDA), headline inflation may ease in the 2nd half of 2024 as a result of the subsiding of pressure on food prices connected with the El Niño effect, according to a BusinessWorld news report.
To put things in perspective, posted below is an excerpt from the BusinessWorld news report. Some parts in boldface…
HEADLINE INFLATION may start easing in the second half of the year as pressure on food prices subsides after the El Niño weather event ends, the National Economic and Development Authority (NEDA) chief said.
“In the second half of this year, we expect the pressure from food prices to diminish, because a big part of that food inflation was imported in the sense that food prices, particularly for staple, have been rising in the world market,” NEDA Secretary Arsenio M. Balisacan told reporters on the sidelines of a forum on Monday afternoon.
Inflation rose for a second straight month in March to 3.7% amid rising food prices. Food inflation accelerated to 5.7%, its fastest pace in four months, mainly driven by rice.
Rice inflation surged to 24.4% in March, the highest since the 24.6% print in February 2009.
“But for rice, (pressure) is expected to decline, (as prices) reached the peak and will start falling after June as the El Niño phenomenon is waning,” Mr. Balisacan said.
The El Niño weather phenomenon is expected to persist until May, but the Philippines may continue to feel its impact until August, the Department of Science and Technology said earlier.
Mr. Balisacan said he is hoping that April inflation would fall within the Bangko Sentral ng Pilipinas’ (BSP) 2-4% target band, although oil prices pose a risk.
He noted April inflation will likely be close to the 3.7% print recorded in March.
“[The] 2-4% is still a fighting target. Of course, we are watching closely the developments in the Middle East. If the oil prices would be affected by the development, there would be some pressure for us,” Mr. Balisacan said, refer-ring to the conflict between Israel and Iran.
The local statistics agency will release April inflation data on May 7.
Mr. Balisacan said that economic growth in the first half may be affected if inflation continues to breach the target.
“[It’s] a challenge because domestic consumption, particularly home consumption and investment, are very sensitive to inflation and interest rates,” he said.
Earlier this month, the Development Budget Coordination Committee (DBCC) revised its gross domestic product (GDP) growth target range to 6-7% this year from 6.5-7.5% previously amid geopolitical tensions, price upticks, and trade restrictions.
The local statistics agency is set to release first-quarter GDP data on May 9.
“With food prices starting to come down, that should be good for growth. But of course, if the energy prices continue to rise, then it could affect logistics, distribution, and it could impact food prices too. But we hope that it will not be serious,” Mr. Balisacan said.
Let me end this piece by asking you readers: What is your reaction to this recent development? Do you think headline inflation in the Philippines will go down slightly in the 2nd half of this year? Do you think external economic developments will cause inflation to rise?
You may answer in the comments below. If you prefer to answer privately, you may do so by sending me a direct message online.
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