​Inflation rises to 4.7%

PHILIPPINES - In Brief 05 Mar 2021 by Romeo Bernardo

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The headline inflation rate rose again from 4.2% in January to 4.7% in February. However, compared with previous months, inflation momentum weakened significantly with the month-on-month inflation rate slowing to 0.2% from an average of over 1% in the last three months. This is due mainly to steadying food prices with increases in meats and fish offset by declining vegetable and fruit prices. Despite the price freeze on pork and chicken, meat prices still rose 2.5% mom in February, with continuing increases in fuel pump prices also pushing up overall prices. So far, efforts to address the pork supply gap through increased imports at lower tariffs have stalled. The executive is barred by law to reduce tariffs while congress is in session and congress will only go on recess later this month.[1] It is possible that the President may suspend congress temporarily in order to issue an executive order to the effect, an option that we heard economic managers support.Continuing uncertainty regarding domestic pork supply coupled with elevated global commodity prices and transport costs pose significant risk to further increases in the headline inflation rate, notwithstanding weak domestic demand. We are revising our inflation forecast for the year from 4.3% to 4.8%, with increased odds of the headline rate breaching 5% in the months ahead but falling back within target later in the year.CHART 1Headline and core inflationSource: PSA[1] https://www.philstar.com/business/2021/02/22/2079604/law-stops-dutertes-pork-import-plan-vs-inflation-now