Stable prices up to year-end as inflation drops, says Neda

Inflation in June fell to a five-month low of 2.8 percent, such that state planning agency National Economic and Development Authority (Neda) on Wednesday said it expects stable prices until year-end to support economic growth.

The latest Philippine Statistics Authority (PSA) data showed that headline inflation last month was the lowest since January’s 2.7 percent, the first month since February that the rate of increase in prices of basic goods settled below 3 percent.

But compared with a year ago, the June figure was higher than the 1.9 percent posted during the same month last year.

In a statement, Neda attributed the month-on-month slowdown in June inflation to slower food and nonfood price adjustments.

“For food and nonalcoholic beverages, inflation slowed to 3.5 percent in June from 3.8 percent in the previous month. Likewise, nonfood inflation slowed to 2 percent in June from 2.5 percent in May,” Neda noted.

“This follows the significantly slower year-on-year increase in domestic petrol prices during the period, particularly unleaded gasoline (5.1 percent from 9.9 percent), diesel (5.3 percent from 13.6 percent) and kerosene (3 percent from 9.6 percent),” Neda added.

Inflation averaged 3.1 percent year-on-year during the first half, within the government’s target range of 2–4 percent.

Neda Undersecretary and Officer-in-charge Rosemarie G. Edillon said “keeping inflation stable strengthens prospects of stronger domestic economic activity in the near-term.”

But Edillon cautioned about domestic and external risks to inflation, including tax reform.

“Domestically, the transitory impact of the proposed comprehensive tax reform program could push up inflation once implemented,” Edillon said.

Hence, she urged the government “to have social safety nets to mitigate the short-run effects” and “to communicate well to the public the comprehensive tax reform program’s benefits, especially in terms of productivity improvements which, in effect, will eventually result in lower inflation.”