December inflation seen to hit 1.5%

MANILA, Philippines — The Department of Finance (DOF) said that the country's inflation could have reached 1.5% in December, as it normalizes from the dampening impact of oil prices.

The DOF's outlook is 0.4% points higher than the previous month's 1.1% points. Its December forecast, however, is still lower than the 2.7% registered in December 2014.

In its latest economic bulletin, the DOF said that the biggest contributors to the increase in inflation rate are transport, alcoholic beverages and tobacco, food, as well as recreation and culture. (READ: Philippine inflation unlikely to go lower than 1.6%)

The agency added that food is adversely affected by Typhoon Lando (Koppu) and holiday-related demand upsurge, transport by the lagged effect of fuel prices, and alcoholic beverages, recreation, and culture due to the holiday demand.

"The recovery of food supply is very important after a strong typhoon; authorities can encourage and develop private sector sources of seeds and seedlings and look into alternative ways of replenishing lost stock, perhaps through imports from Association of Southeast Asian Nations (ASEAN)," the DOF said.

To manage risks of higher inflation and cushion the impact on food prices and utility rates, the National Economic and Development Authority (NEDA) earlier called for the faster implementation of the Roadmap for Addressing the Impact of El Niño (RAIN).

"The government should err on the high side in determining food import requirements in anticipation of El Niño to avoid food price spikes, which would be very detrimental to the poor who spend over 60% of their budget on food," NEDA Deputy Director-General Rolando Tungpalan earlier said.

Tungpalan also took note of the unstable energy situation in Mindanao, given its large dependence on hydropower plants. 

"There is a need to reinforce measures to expand investments in the rehabilitation program for existing hydropower plants so as to increase their generation capacities," the NEDA official said.

"The government should also start preparing for the possible impact of La Niña, which could be a strong one as well. The current drier than normal conditions must be taken advantage of to build flood mitigation infrastructures," Tungpalan said. 

In November, inflation, or the increase in prices of widely used goods, kicked up to 1.1% from a record low of 0.4% in October due to a sharp increase in food prices, data released by the Philippine Statistics Authority (PSA) showed. — Rappler.com