Inflation slows down in March

PHILIPPINES - In Brief 07 Apr 2021 by Romeo Bernardo

---

The headline inflation rate eased from 4.7% in February to 4.5% in March, below the median analyst forecast of 4.8%. The disinflation mainly reflects a drop in food prices following normalizing fish and vegetable supplies as well as artificially steady meat prices with the two-month price freeze on pork and chicken effective through April 8. Higher oil prices, meanwhile, pushed up transport costs, the main driver of non-food inflation during the month. Excluding volatile items, core inflation stayed at 3.5%.The inflation outlook has improved with the lower-than-expected March outturn and expectations of more stable food prices ahead. Last March 27, the President proposed to congress an increase in the minimum access volume for pork products, raising the 54.2k metric tons (MT) quota by 350k MT. With congress in recess through mid-May, the measure will, by law, automatically come into effect after 15 days, which will over time help plug the current shortage in local hog production. Imports however will remain subject to a high 30% in-quota tariff, limiting prospects for a sharp price decline. On the other hand, the re-imposition of lockdown measures in NCR+ (exempting movement of food and agricultural products) is expected to dampen demand further, capping second round impacts especially with high unemployment. We are nudging down our inflation forecast for the year from 4.8% to 4.5% while keeping an eye on upside risks emanating from external sources, including possible supply chain disruptions following the Suez Canal crisis, potential upward pressures on food prices, including for pork following another outbreak of the African Swine Fever in China, the world’s largest...