INFLATION has likely peaked and will continue easing for the rest of the year, a Cabinet official said.
“I think we expect, in the coming months, that [inflation] will come down because the El Niño is over — hoping that the La Niña will not bring severe flooding and all that — and I think that prices will start to moderate,” Socioeconomic Planning Secretary Arsenio Balisacan told reporters on Friday.
“[S]o, I think it will enable us to achieve the target,” he added.
“I cannot say the worst is over, but I think that extreme situations are … not likely anymore.”
Inflation slowed to 3.7 percent in June, down from May’s 3.9 percent and better than the market consensus of an unchanged result.
It ended a four-month upward trend and defied earlier expectations of a second-quarter breach — primarily due to the impact of the El Niño weather pattern on food production — of the Bangko Sentral ng Pilipinas’ (BSP) 2.0- to 4.0-percent target.
Balisacan expects the decline to continue, saying that “non-food items had quite favorable price movements last month.”
“Hopefully, we can [continue to] manage that, with no sharp or unforeseen price increases coming from utilities and similar sectors. So, I think it’s okay,” he added.
Bank of the Philippine Islands senior economist Emilio Neri also said that “inflation appears to have peaked for the year.”
The rate is likely to remain near the upper limit of the BSP target in July, he added, before a significant decline starting in August.
“With El Niño now over, rice production is expected to recover in the second half of the year, which could result in a drop in prices as supply improves,” Neri said.
Rice inflation, which contributed to the uptick in inflation in prior months, declined to 22.5 percent last month from 23.0 percent in May.
While still elevated, Balisacan said that it was due to world prices having stayed high.
Neri said that rice prices could see a more substantial decline following the government’s implementation of a rice tariff cut this month.
He noted that in 2019 when the Rice Tariffication Law was enacted, a subsequent drop in rice prices reduced headline inflation by up to 1.2 percent.
The rice tariff cut, to 15 percent from 35 percent and in effect up to 2028 depending on regular reviews, prompted the BSP’s policymaking Monetary Board to last month lower its inflation forecasts for this year and the next.
The risk-adjusted forecast for 2024 was trimmed to 3.1 percent from 3.8 percent and that for 2025 was cut to 3.1 percent from 3.7 percent.
The baseline forecasts for 2024 and 2025 were lowered to 3.3 percent and 3.1 percent, respectively, from 3.5 percent and 3.3 percent.
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