MANILA – Philippines’ inflation rate continues to decelerate since peaking to 6.7 percent in September and October 2018, with Filipinos’ love for food and dining out as well as personal care keeping the overall inflation afloat as of September 2019.
Rate of price increases in the Philippines dropped further to 0.9 percent last September from month-ago’s 1.7 percent primarily due to slower annual inflation rate of the heavily-weighted food and non-alcoholic beverages.
For one, rice, a staple food, registered 8.9-percent contraction.
The major contributor to inflation was the restaurant and miscellaneous goods and services, with a rate of three percent. This particular group, which is one of the 11 major commodity group, accounted for 45.8-percent of the overall inflation.
Specifically, meals eaten outside home posted a 3.2 percent inflation and 67.7 percent share; personal care, 2.8 percent inflation and 28 percent share; and personal effects, 2.1 percent inflation and 3.2 percent share.
Rizal Commercial Banking Corporation (RCBC) lead economist Michael Ricafort said that sustained drop of domestic inflation rate, along with people’s increased purchasing capacity as the reason for the rise in the restaurant and miscellaneous goods and services.
He explained “lower inflation effectively increases the disposable income and spending power of consumers.”
This “thereby (is) a catalyst in spurring greater economic activities and faster economic/GDP (gross domestic product) growth,” he said.
“Since consumer spending accounts for about 70 percent of the economy, (this development) thereby makes growth more inclusive since lower inflation has a positive effect on practically all consumers, as they can purchase more goods and services than otherwise,” he added. The economist expected domestic inflation rate to bottom out either last September at 0.9 percent or this month at “slightly less than 0.9 percent due to the high base/denominator effects.”
BSP’s policy-making Monetary Board, during its rate setting meet last Sept. 26, cut anew the central bank’s average inflation forecast for this year to 2.5 percent from 2.6 percent previously, but maintained the 2.9 percent projections for the next two years.
BSP assistant governor Edna Villa, who heads the International Monetary Affairs and Surveillance Sub-Sector, said they project continued deceleration of inflation rate to “reach the lower-end of the target range until November 2019 due primarily to base effects as oil and rice prices peaked at the same period in 2018.”
“For 2020 and 2021, the baseline forecasts reflect the expected recovery in domestic economic growth and positive base effects as the impact of rice tariffication tapers off,” she added.(PNA)