DOF Economist Forecasts Sustained Low Inflation Environment This 2016

An official of the Department of Finance (DOF) continues to see a low inflation environment for the Philippines this 2016 on lower oil prices and impact of low commodity prices in the international market.

DOF Undersecretary and Economist Gil Beltran, in the agency’s economic bulletin, said the drop in inflation rate last January to 1.3 percent from month-ago’s 1.5 percent was the result of lower fuel and food prices.

“Prospects for the year point toward subdued price increases due to developments in the international market,” the bulletin said.

Beltran explained that energy prices “are expected to remain depressed this year” and sustained drop in coal prices “should translate into lower electricity cost.”

He noted that the bulk of the power source in the country are coal-based and proportion of generation charge in a consumers’ electricity bill is more than half of the typical bill.

He said food prices may spike due to the impact of the extended dry spell but this will be compensated by the government’s measure to increase rice imports.

“Core inflation, a measure of underlying inflation, also indicates modest inflation in the near-term,” he said.

With inflation seen to remain low, the Finance department executive said the domestic economy will continue to get a lift through increased economic activity without experiencing faster inflation.

“This will give the BSP (Bangko Sentral ng Pilipinas) ample room to manage domestic liquidity to boost the country’s GDP (gross domestic product) growth,” Beltran added. (PNA) SCS/JSV/EDS