Connect with us

Hi, what are you looking for?

News

May inflation likely surged past 5%

An attendant fills a jeepney at a gas station in Pasay City. — PHILIPPINE STAR/ RUSSELL A. PALMA

By Keisha B. Ta-asan

INFLATION likely surged past 5% in May as food and oil prices continued to climb amid tight global supply, according to analysts.

A BusinessWorld poll of 16 analysts yielded a median estimate of 5.4% for May inflation, matching the midpoint of the 5-5.8% forecast by the Bangko Sentral ng Pilipinas (BSP).

If realized, this would be the quickest since the 6.1% print in November 2018. It would also be faster than the 4.9% print seen in April and 4.1% in May 2021.

This would also exceed the BSP’s 2-4% target band and the Development Budget Coordination Committee’s inflation rate assumption of 3.7-4.7% this year. 

The Philippine Statistics Authority (PSA) will release the May consumer price index (CPI) data on Tuesday.

“Crude oil prices continue to rise and its effects are spreading to other consumer goods and services,” Victor A. Abola, economist at the University of Asia and the Pacific, said.

Since Russia invaded Ukraine in late February, crude oil prices have surged to above $100 per barrel amid concerns over supply.

Data from the Department of Energy (DoE) showed that gasoline, diesel, and kerosene prices have jumped by P23.85 per liter, P30.30 per liter, and P27.65 per liter, respectively, year to date as of May 31.

“Sources of second-round inflation effects include higher wages, possible hikes in transport fares that could lead to higher prices of other affected goods and services in the economy,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

Wage hikes in 14 regions will take effect this month, while transport groups have filed petitions to raise fares.

“Food, transport and utility costs will be the main drivers for this month’s breach of the inflation target. Supply chain issues have forced up production costs from everything from bread, to fish and vegetables,” ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said in an e-mail.

The Russia-Ukraine war, as well as the lockdowns in China have caused widespread supply chain disruptions. Global food prices have also gone up as some countries introduced protectionist measures to ensure domestic supply.

“The country’s recent policy to increase imports of food to augment domestic production shortages, are at risk from increasing global food protectionism. Talks between Thailand and Vietnam on possibly increasing rice prices is worrisome given that rice makes up almost 9% of our CPI basket,” China Banking Corp. Chief Economist Domini S. Velasquez said in an e-mail.

However, the rise in inflation may have been tempered by the lower electricity rates and liquefied petroleum gas (LPG) prices, Ms. Velasquez said.

Manila Electric Co. said the overall rate went down to P10.063 per kilowatt-hour (kWh) in May from P10.183 per kWh in April.

Oil companies cut the price of LPG by P5.73 to P5.75 per kilogram (kg) or about P63.03-P63.29 per 11 kg cylinder as of May 1.

ECONOMIC REOPENING“On top of supply side pressure, inflation is also likely driven by resurgent demand side inflation as the economy is operating at its new potential capacity. Malls are packed, traffic is back and restaurants are full,” Mr. Mapa said.

The BSP is expected to tighten monetary policy further to curb inflationary pressures.

“BSP would be wise to nip the brewing demand side pressures in the bud with aggressive tightening early on, given the lagged impact of BSP rate adjustments,” Mr. Mapa said, adding that he expects a 50-basis-point (bp) rate adjustment at the Monetary Board’s next policy review.

Security Bank Chief Economist Robert Dan J. Roces said in a Viber message that a 25-bp hike at the June 23 meeting “will be prudent to continue to rein-in inflationary trends.”

“Inflation may slowly cool in the second half of the year on the back of easing oil prices and BSP’s expeditious monetary policy rate hike but for now, inflation will remain sizzling hot,” Analyst Sonia Zhu from Moody’s Analytics said in an e-mail.

In its May 19 meeting, the BSP raised its key interest rate for the first time since 2018 to combat rising inflation. The benchmark rate was increased by 25 bps to 2.25%.

“Persistent inflationary pressures point to the need for prompt monetary action to anchor inflation expectations,” BSP Governor Benjamin E. Diokno had said on May 19.

The BSP also raised its average inflation forecast for 2022 to 4.6% from the previous forecast of 4.3%. For 2023, the BSP’s inflation forecast was hiked to 3.9% from 3.6% previously.

Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!

Latest

News

Follow us on Spotify BusinessWorld B-Side The Filipino workforce is gradually adapting to a work environment that has been changed forever due to the pandemic....

News

The Department of Environment and Natural Resources (DENR) has given recognition to volunteers and partners who had significant contribution to the cleanup and rehabilitation...

News

Spotlight is BusinessWorld’s sponsored section that allows advertisers to amplify their brand and connect with BusinessWorld’s audience by enabling them to publish their stories...

News

Former client, Jennifer Pacquing on her experience with Planning for Canada services. Planning for Canada – Planifier pour le Canada (PfC) is pleased to...

News

Windmills are seen in Pililia, Teresa, Rizal province on April 25. — PHILIPPINE STAR/ MICHAEL VARCAS THE INCOMING Marcos administration should consider the full...

News

THE PHILIPPINE central bank should deliver more aggressive rate hikes in order to curb inflation that is now expected to reach 5% this year,...

You May Also Like

News

BW FILE PHOTO GROSS BORROWINGS by the National Government reached P2.6 trillion as of end-September as it continued to raise funds to respond to...

News

REUTERS By Luz Wendy T. Noble, Reporter The country’s foreign exchange buffers slightly increased as of end-October as the value of the central bank’s...

News

COVID-19 has had a significant impact on the mental health of Filipinos across different groups all over the archipelago. From frontline workers, parents balancing...

Financial Advisors

The healthcare ecosystem is one that has thrived on the cusp of scientific progress, benefitting enormously from the winds of change in the technological...

Disclaimer: Respect Investment.com, its managers, its employees, and assigns (collectively "The Company") do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

Copyright © 2022 Respect Investment. All Rights Reserved.