According to economists, inflation will likely decline again in May.
Due to decreasing food costs, headline inflation is projected to slow to 6.1 percent in May, an economist predicted on Friday.
“Some food prices already started to ease recently on better weather conditions that led to some increase in supply that helps in lowering food prices, after some storm damage in the latter part of 2022 up to early 2023, especially the shear line that hit some parts of the Visayas and Mindanao,” said Michael Ricafort, chief economist at Rizal Commercial Banking Corporation (RCBC).
For the third straight month, inflation fell in April, ending at 6.6 percent as opposed to 7.6 percent in March.
According to Ricafort, the cost of various agricultural products kept declining.
According to him, the decline could be attributed to the restricted importation of sugar and onions, the one-year extension of the lower import tariffs on items like meat, rice, corn, and coal, as well as other non-financial measures that aimed to increase local supply and drive down the cost of food and other agricultural products.
According to Ricafort, other global commodities prices, including those for wheat, soybeans, natural gas, coal, iron, steel, copper, and nickel, have also decreased and may assist to reduce inflationary pressures in the months to come.
“The anniversary of the local wage hikes, transportation hikes, and second-round inflation effects starting June to July 2023 would quantitatively lead to further year-over-year deceleration of year-on-year inflation in the second half of 2023 due to much higher inflation base effects by then that could potentially lead to the much slower inflation rate to as slow as 3% to 4% year-over-year levels by the latter part of 2023,” Ricafort said.
According to him, the peso’s current exchange rate of 55.20 might also aid in lowering import expenses, supporting additional local fuel pump price reductions, and reducing total inflation.
However, Ricafort noted that counterbalancing risk factors, such as rising energy and water rates and the El Nino drought, which might lower agricultural production and supplies, could result in some price increases and slow the deceleration of inflation.
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