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ASF, volatile oil prices may push inflation up in 2020 — BSP

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THE central bank on Friday flagged an upside risk to inflation next year, amid the volatility of global oil prices and the African Swine Fever (ASF) outbreak.

“The balance of risks to the inflation outlook has shifted over the upside for 2020 while it continues to tilt on the downside for 2021. Over the mid-term, upside risk to inflation might emanate mainly from the volatility in global oil prices and the potential impact of the ASF outbreak,” Bangko Sentral ng Pilipinas (BSP) Department of Economic Research Director Dennis D. Lapid said in a briefing on Friday.

Reuters reported that the Philippine hog industry is losing nearly $20 million a month from ASF infections, quoting agricultural officials. The highly contagious pig disease is spreading in the country, driving up prices of other meat products.

Inflation in the third quarter further decelerated to 1.7% from 3% in the April to June period. This brought the year-to-date average inflation to 2.8% which is still within the government’s target of 2-4%.

In October, inflation eased to 0.9%, its slowest clip since the 0.7% in April 2016 amid lower food electricity and food prices paired with base effects coming from last year’s nine-year high 6.7% inflation logged in September and October 2018.

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For October and the rest of 2019, the central bank sees inflation to further tread downward.

“We don’t have the official forecast yet but just coming from the pattern of inflation that we saw last year, September and October were the high points and therefore, just because of the base effects, we’ll see that the impact of the high inflation last year will be to lower the inflation rates,” BSP Deputy Governor Francisco G. Dakila told reporters on the sidelines of the central bank’s briefing on the third quarter inflation last Friday.

The PSA is set to report the October inflation on Nov. 5.

Mr. Dakila said they expect a low inflation environment in October.

“We are expecting that inflation will still be quite low this October…The low inflation numbers are going to provide a boost to consumption and this will coincide with the spending in the fourth quarter for the Christmas season,” he added.

Meanwhile, the BSP is confident the economy can grow by 6.5% in the fourth quarter, given the catchup in government spending, lower inflation trend in recent months and anticipated rise in consumer spending during the holidays.

“The fourth quarter will be stronger because of the acceleration in government spending that will already be catching hold by that time as well as this will come with spending during the Christmas season. So we can see that the fourth quarter GDP will be closer to the midpoint of the 6-7% target for the fourth quarter,” Mr. Dakila said, noting that a 6.5% growth is reachable by the fourth quarter.

Data from the Bureau of Treasury (BTr) released on Oct. 22 showed that national government expenditures climbed by 39.01% in September to P415.1 billion from the P298.6 billion a year earlier, its best performance since the 42.7% increase recorded in April last year.

Government spending earlier in the year was anemic mainly due to the delay of the passage of the 2019 budget as well as the election ban, according to BTr. — L.W.T.Noble with report from Reuters

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