Philippines: Inflation loses traction in June – UOB

Senior Economist at UOB Group Julia Goh and Economist Loke Siew Ting assess the latest inflation figures in the Philippines.

Key Quotes

“Headline inflation moderated further to 4.1% y/y in Jun (from 4.5% in May), coming in line with our estimate (4.0%) and Bloomberg consensus (4.3%). It also marked the lowest rate in six months, largely pulled down by a persistent decline in prices of selected staple food (i.e. rice and vegetables) and dissipating year-ago high base effects in the transport segment amid ongoing COVID-19 containment measures.”

“We maintain our view that the Philippine inflation will continue to retrace back into BSP’s upper bound of 2.0%-4.0% target range in 2H21, resulting in an average full-year inflation rate of 4.0% for 2021 (BSP forecast: 4.0%; 2020: +2.6%). Food price pressures have abated with better weather conditions and implementation of direct non-monetary measures. The extension of movement restrictions and weak labour market conditions would continue to temper inflationary pressures. That said, volatile commodity prices particularly recent spikes in crude oil prices and a stronger-than-expected recovery in global demand are wildcards for the inflation outlook.”