Inflation stayed at 3.3 percent in December, the government reported on Friday, bringing the full-year average to 3.2 percent.
The result for the month was attributed to mixed movements in prices of food and non-food items. While unchanged from November, it was higher than the 2.6 percent recorded a year earlier.
The reading hit the 3.3 percent average forecast of economists polled by The Manila Times. The Bangko Sentral ng Pilipinas had a forecast range of 2.9-3.6 percent while the Department of Finance projected an easing to 3.2 percent.
The full-year figure of 3.2 percent, meanwhile, hit the consensus estimates of economists and the Bangko Sentral’s. It fell within the government’s 2.0-4.0 percent target but was higher than the 1.8 percent average in 2016.
The National Economic and Development Authority (NEDA) noted that December inflation was driven by faster increases in food prices (corn, meat, fish, fruits, cereals), tempered by lower non-food inflation (transport, housing, water, electricity, gas and other fuels).
Core inflation, which strips out volatile food and fuel prices, slowed to 3 percent from 3.3 percent in the previous month but climbed from 2.5 percent a year earlier.
Year-to-date core inflation settled at 2.9 percent, the Philippine Statistics Authority (PSA) reported.
Prospects for 2018
Commenting on the result, central bank Governor Nestor Espenilla Jr. said the BSP continued to expect inflation to remain manageable over the policy horizon.
For this year and the next, inflation is projected to settle above the midpoint of the 2.0-4.0 percent target range.
“Robust domestic economic activity, ample liquidity, and well-anchored inflation expectations continue to support within-target inflation,” Espenilla said.
He added that the BSP would remain vigilant against any risks to the outlook to ensure that monetary policy remained consistent with the mandate of maintaining price stability conducive to economic growth.
The NEDA, for its part, expects inflation to remain stable over the near-term despite pressures that may be brought about by the newly enacted Tax Reform for Acceleration and Inclusion (Train) law, adverse weather and oil price uncertainties.
Socioeconomic Planning Secretary Ernesto Pernia said the full-year rate of 3.2 percent supported the case for maintaining the inflation target at 2.0-4.0 percent.
The NEDA also said that near term supply conditions, particularly for major agricultural commodities, appeared favorable.
The crop outlook, according to the PSA as of October 2017, indicates increased harvests due to sufficient water supply and government interventions.
To relieve the inflationary effects of Train, Pernia said the government needed to prioritize changes to local laws that would end quantitative restrictions on rice and replace these with tariffs.
“This measure will remove the policy uncertainty in rice trade and thus encourage more investments in production and post-production innovation. The revenues from the tariff can be used to fund or subsidize such innovations,” he added.
“Meantime, efforts must be made to strengthen the resiliency of farmers from extreme weather conditions to maintain the stability of food prices. One is by shifting to climate change-ready rice varieties.”
Pernia noted that any increases in prices in the first few months of 2018 would be tempered by an expected decline in power rates as capacity fees from power generators had fallen due to fewer power outages.
He added that the timely implementation of the “Build Build Build” program would also be critical in bringing down electricity and transportation costs over the medium-term.
“We are happy that we have stayed within the inflation target last year, and that the Development Budget Coordination Committee will likely maintain the 2 to 4 percent target range for this year until 2020,” Pernia said.
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