The Department of Finance (DOF) expects the manageable uptick in the growth of consumer prices to boost domestic demand as well as counterbalance weaker global-growth outlook.
In the latest DOF economic bulletin, Finance Undersecretary Gil Beltran said that headline inflation is expected to remain benign in the near future and thus help further boost the country’s robust economy.
“Short-term outlook suggests inflation will likely to be benign,” Beltran said in his report to Finance Secretary Carlos Dominguez III. “This will give economic policy makers more room for maneuver to sustain economic growth and temper external shocks.”
The Philippine Statistics Authority earlier reported that July inflation stayed flat at 1.9 percent, same as DOF’s forecast for the month.
“This is brought about by the slowdown in the growth of prices of food, transportation, and education, effectively dampening the uptick in price of housing, utilities and fuels,” Beltran said.
In July, prices of alcoholic drinks and tobacco slightly rose by 5.8 percent from 5.7 percent in June; furnishing, household and equipment went up 2.0 percent from 1.8 percent previously; while recreation and culture increased by a faster 1.8 percent from 1.7 percent.
In contrast, the general price increase for food and non-alcoholic drinks slowed to 2.7 percent from 2.9 percent in June, with vegetables down to 12.8 percent from 16.5 percent.
Likewise, health dropped from the previous month’s 2.5 percent to 2.4 percent this July; communication declined from 0.2 percent to 0.1 percent; and eduction from 1.9 percent to 1.8 percent over the same two-month period.
Meanwhile, non-food (0.9 percent) as well as clothing and footwear (2.5 percent) were steady in July, while housing, utilities and fuels were at a negative growth of 0.2 percent, but higher than negative 0.4 percent in June.
The July inflation was similar to the previous month, but higher compared with the 0.8 percent registered a year ago.
Core inflation, which excludes selected volatile food and energy prices, likewise remained stable at 1.9 percent last month.
The actual July inflation was within the Bangko Sentral ng Pilipinas (BSP) forecast of 1.5 percent to 2.4 percent for July 2016, and median market expectation of 1.9 percent.
Moreover, headline inflation for January to July this year averaged at 1.4 percent, still below the low end of the government’s inflation target of 2.0 percent to 4.0 percent.
The National Economic and Development Authority is now expecting full-year inflation to average at around 1.98 percent.
During the last rate-setting meeting of the central bank, the Monetary Board decided to lower its inflation forecast this year from 2.1 percent to 2.0 percent, but kept the 3.1 percent projection for 2017 and 2.6 percent for 2018.