By Katherine K. Chan, Reporter
SHARP OIL PRICE increases driven by supply disruptions from the Middle East war, together with pricier rice, can have pushed Philippine inflation to its fastest pace in nearly two years, analysts said.
A BusinessWorld poll of 18 analysts yielded a median estimate of three.8% for the buyer price index in March, accelerating from the two.4% in February and 1.8% a 12 months ago.
That is near the upper end of the Bangko Sentral ng Pilipinas’ (BSP) 3.1%-3.9% forecast for the month.
If realized, the headline print could be the fastest in 20 months or since 4.4% seen in July 2024.
This is able to also mark the third straight month that inflation settled throughout the central bank’s goal.
The Philippine Statistics Authority (PSA) will release the March inflation data on Tuesday, April 7.
“I’m 3.8% for the March inflation print, with a lot of the acceleration from 2.4% in February coming from transport deflation coming swiftly to an end on the back of the most important fuel price hikes seen in recent weeks,” Miguel Chanco, chief Emerging Asia economist at Pantheon Macroeconomics, said in an e-mail.
He said transport inflation likely quickened to eight.5% last month from -0.3% in February.
“On top of this, we’re expecting an extra rise in food inflation where low base effects are still doing plenty of heavy lifting,” Mr. Chanco added.
In March, local fuel retailers raised pump prices by double digits because the US-Iran war sent crude oil prices soaring. Pump price adjustments stood at a net increase of as much as P43.50 a liter for gasoline, P67.35 per liter for diesel and P70.90 per liter for kerosene last month.
The Philippines is a net importer of crude oil and sources most of its crude oil in addition to liquefied petroleum gas supply from the Middle East. This makes the country extremely vulnerable to global crude price swings.
Analysts also attributed the faster headline clip to higher rice prices and electricity rates through the month.
“As well as, higher rice and power prices, coupled with the continued depreciation of the peso, likely amplified imported inflation pressures, especially for fuel, food, and other essential goods,” Maybank Investment Bank economist Azril Rosli said in an e-mail.
“Some offset can have come from softer prices for vegetables, fish, and meat, but overall price pressures appear to have been dominated by energy-led cost increases and second-round effects in services and utilities,” he added.
Based on PSA data, the common cost of local regular milled rice climbed by 5.8% to P48.69 a kilo within the second half of the month from P46.02 a 12 months earlier. The worth of well-milled rice went up by 8.02% 12 months on 12 months to P56.68 a kilo, while the value of special rice rose by an annual 3.79% to P64.07 a kilo.
Manila Electric Co. hiked electricity rates by 64.27 centavos per kilowatt-hour (kWh) to P13.8161 per kWh for its customers within the greater Metro Manila area. This meant households consuming 200 kWh monthly paid about P129 more of their electricity bill for March.
TARGET BREACH?
Meanwhile, several analysts see inflation potentially breaching the BSP’s goal in March, as base effects and elevated prices of rice and other staple foods add to the inflationary impact of oil shocks.
“We forecast March inflation at 4.2% 12 months on 12 months, up from 2.4% in February, mainly reflecting unfavorable base effects and better food prices, particularly rice and other key staples, amid tighter domestic supply conditions and lingering import‑related cost pressures,” Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion said in an e-mail.
“Transport and utility costs also likely contributed following recent movements in global oil prices, while core inflation stays relatively stable for now,” he added.
Emerging supply-side pressures could also drive second-round price effects on transport fares, electricity rates and wage-related adjustments, Mr. Asuncion noted.
The BSP wants to maintain inflation throughout the 2%-4% range, with 3% as their point goal.
Nonetheless, the central bank is now expecting the headline print to overshoot the band amid price pressures from elevated oil costs and second-round inflation effects.
If the BusinessWorld poll’s median forecast materializes, headline inflation would average 2.7% as of March, still below the BSP’s revised inflation estimate of 5.1% for your entire 12 months.
Meanwhile, Security Bank Chief Economist Angelo B. Taningco projects inflation to speed up to 4.4% in March, citing the peso’s slump as one in every of the drivers.
The peso touched back-to-back record lows last month as uncertainties over the Middle East war took a toll on the local currency.
On Tuesday, the peso closed at a fresh low of P60.748 against the dollar, down 5.8 centavos from its previous record finish of P60.69 on Monday, Bankers Association of the Philippines data showed.
PAUSE OR HIKE?
Still, most analysts polled by BusinessWorld said the present macroeconomic backdrop calls for a pause on the BSP’s upcoming meeting later this month.
“Easing would risk fueling inflation expectations, while aggressive tightening would weaken growth without addressing the basis explanation for the shock,” Moody’s Analytics Assistant Director and Economist Sarah Tan said in an e-mail.
“On this context, we expect the BSP to adopt a wait-and-see approach, assessing whether the rise in oil prices proves temporary or sustained. For now, a chronic pause appears essentially the most realistic path, and we expect the BSP to carry fire on the April meeting,” she added.
Nonetheless, Security Bank’s Mr. Taningco sees the BSP tightening in a move to temper inflationary pressures.
“We still expect the BSP to lift the policy rate by 25 basis points (bps) to 4.5% at its April 23 meeting,” he said via e-mail. “This is basically in response to March inflation topping the 4% upper sure of the BSP’s goal range.”
On March 26, the central bank maintained the important thing rate at 4.25% in an off-cycle meeting because it sought to appease markets amid uncertainties arising from the Middle East war.
The BSP last reduced its benchmark rate by 25 bps for a sixth straight meeting in February, extending its easing cycle to a 12 months and a half. It has cut a complete of 225 bps since August 2024.
BSP Governor Eli M. Remolona, Jr. said they opted to carry regular as policy adjustments can have little impact on taming supply-driven inflation pressures, adding that tightening may delay economic recovery.
Still, the central bank chief said the Monetary Board will monitor second-round price effects to guide their upcoming policy decisions, with a rate hike likely if the value of crude oil reaches $200 per barrel.
The Monetary Board will hold its second policy review this 12 months on April 23.