Gov’t hits inflation target for 2014

MANILA, Philippines – For the fourth consecutive month, headline inflation slowed down to 2.7% in December, the National Economic and Development Authority (NEDA) reported Tuesday, January 6.

The latest inflation pulled down average inflation to 4.1% – within the government target range of 3% to 5% for 2014.

Inflation was also down to 3.7% in November.

“The lower inflation outturn in December bodes well for consumption growth in the fourth quarter of 2014. Also, this shows that government policies remain supportive of a manageable inflation rate,” said Socio-economic Planning Secretary Arsenio M. Balisacan.

Core inflation in December, excluding select volatile food and energy prices, also eased to 2.3% from 2.7% in November, and 3.2% in December 2013.

Full-year core inflation hit 3%.

Petroleum, electricity roll back lowers inflation

The petroleum prices and electricity rate rollback, including lower increases in most food items,  further pulled down inflation, NEDA said.

For December, price indices of petroleum, electricity, gas, and other fuels was -8.3% from -2.6%, while operation of personal transport equipment hit -6% from -1.2%.

Electricity rates were also lower year-on-year in December following the decline in generation and transmission charges on the back of improved availability of power plants and lower cost of fuel, Balisacan said.

Manila Electric Company (Meralco) charges further went down in December by 13%, equivalent to a reduction of P0.73 ($0.016*) per kilowatt hour (kWh).

The sharp decline in Dubai oil prices that fell to its lowest since 2010, translated to lower domestic petroleum prices, NEDA added.

Prices for unleaded gasoline (-19%), diesel (-26%), kerosene (-23%), and liquefied petroleum gas or LPG (-32%) were further reduced last month.

Food inflation down by 1%

Year-on-year food inflation in December also slowed to 5.5% from 6.5% in the previous month, mainly due to high food prices in the same period of 2013 partly arising from Super Typhoon Yolanda (international  name: Haiyan) that hit the country in early November 2013.

Balisacan also cited factors that might have contributed to the latest decline in inflation: the absence of major economic shocks that could significantly impact food supply; normalization of supply chain of other food products due to the augmentation of rice stocks from imports; and the lifting of the expanded Manila daytime truck ban in September.

Risks ahead

Despite hitting the 2014 target, the government is still on guard for possible inflation risks for 2015 such as pressures due to higher water rates and a possible spike in agricultural commodities due to damage from typhoons Ruby and Seniang.

Programs to aid areas highly vulnerable to dry spell as El Niño looms are also to be intensified, Balisacan said.

The logistical issues surrounding the truck ban also continue to pose risks.

“It’s critical to continue exploring a more lasting solution to the congestion problem to avoid future disruptions in the domestic supply chain that could result in higher transportation costs,” Balisacan said. – Rappler.com