Oil Price Spike Seen to Drive Higher Inflation in May — Economist

Inflation in May has been seen to further increase to 5 percent from 4.5 percent in April mainly due to higher oil prices in the global market, IHS Markit Chief Economist for Asia Pacific Rajiv Biswas said.

The economist’s forecast is still within the 4.6 to 5.4 percent inflation projection of Bangko Sentral ng Pilipinas (BSP) for the previous month.

“Consumer price index pressures are expected to have risen further in May 2018, mainly due to the impact of rising world oil prices on domestic retail petrol prices,” Biswas said in an e-mail to the Philippine News Agency (PNA) Monday.

“Rising tensions between the United States and Iran in the Middle East as well as declining Venezuelan oil production have pushed world oil prices higher in recent weeks,” he added.

Inflation is the rise in prices of goods and services in the market. The higher the inflation, the lower the purchasing power of money.

Earlier, the Philippine government expected inflation to further climb for five consecutive months this year — the same year when the government implemented the Tax Reform for Acceleration and Inclusion (TRAIN) law.

But economic managers reiterated that the TRAIN law is not the main cause of increasing price pressures in the past months. It can be recalled that April’s inflation climbed to 4.5 percent, which exceeded government’s 3.0 percent target.

In an analysis report of the Department of Finance (DOF), it singled-out Profiteering, which contributed 0.7 percentage points — as the highest contributor to the excess inflation in April 2018.

The TRAIN law only contributed 0.4 percentage points in the excess in inflation target, which is within the expectation of BSP, DOF, Department of Trade and Industry (DTI), and National Economic and Development Authority (NEDA).

Last month, President Rodrigo Duterte ordered DTI to strengthen its market monitoring and apprehend those who are profiteering.

In a press briefing last week, trade and industry Secretary Ramon Lopez said that sharp increases were observed in the prices of agricultural products, and not in basic goods that are covered by suggested retail prices.

Meanwhile, actual inflation data is expected to be released on Wednesday. (PNA)