SEPTEMBER 2018 INFLATION HITS 6.7% | Marvin Germo

SEPTEMBER 2018 INFLATION HITS 6.7%

By: Marvin Germo | October 6, 2018

Surprised? Not at all.

The Philippines’ inflation rate has been the main highlight this 2018. Why? It went beyond Bangko Sentral ng Pilipinas (BSP)’s projected target and despite the monetary authorities’ measure implemented in order to reduce and stabilize it, their efforts proved futile.

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Stock Smarts General Santos – October 6 – 7, 2018
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Top 10 Stocks for 2019  —  December 15, 2018

Last August, the inflation rate stood at a surprising 6.4% despite the early start of BSP’s counter measure for the increasing rate. The BSP consistently increased it key policy rates, the latest one made on September. Today, October 5, the Philippine Statistics Authority (PSA) finally released an update on the rate and it’s for the month of September.

The September inflation rate is at 6.7%, higher by 0.3%. If truth be told, we were all expecting that the inflation rate would have at least calm down to a considerable extent but, instead, it went otherwise. The Department of Finance (DOF) and the BSP projected inflation to be at 6.4% and 6.8%, respectively.

For 2018, the BSP has readjusted its inflation target to 6.3-7.2%. The increase in the inflation rate was due to the following: First, acceleration of food and non-alcoholic beverages index on September. Second, the effects brought about by the recent calamity that hit the country which wiped out P26.7 billion worth of agricultural goods. Third, oil price hikes in the last 8 consecutive weeks.

 

The effects of this vary among regions in the country. In the National Capital Region (NCR), the month of September resulted to 6.3% which is better than that of 7% the previous month. In the other regions, it is now at 6.8% which is higher than that of the previous month which was at 6.2%. The top three (3) recorded inflation rates for September are the following: Bicol Region, Autonomous Region in Muslin Mindanao and the Ilocos Region.

In order to address the problem with the supply of agricultural goods, the President has actually issued an Administrative Order removing non-tariff barrier in the importation of agricultural products. This will not directly solve our inflation problem but it is the best immediate action to take.

The Bottom Line

The interest rate of the BSP has already been has already been increased four (4) times this year and yet the rate keeps on rising. This can only mean one thing: Using policy rates to solve our problem of inflation is not the most effective. The are other contractionary measures the BSP can use yet it chooses to use rates when no direct positive effect can be seen.

Because of the unsolved inflation problem, other key economic factors are at stake like the Philippines’ Gross Domestic Product (GDP), foreign market investments and even the publics’ confidence in the present government. It is almost the end of the year and the third quarter economic results have not given us good numbers. It’s only a few months left before 2018 ends and it is a challenge for the government to take the necessary measures before things go out of whack.

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