By Luz Wendy T. Noble

INFLATION may have quickened slightly in February due to higher food prices, which was likely offset by lower utility and oil prices amid the coronavirus disease 2019 (COVID-19) outbreak and subsiding risks from the Taal Volcano eruption.

A BusinessWorld poll of 17 economists last week yielded a 3% median estimate for February headline inflation, which is near the upper end of the 2.4-3.2% estimate given by the Bangko Sentral ng Pilipinas (BSP) on Friday.

If realized, February will be the fourth straight month of quicker inflation, picking up from the 2.9% print in January. However, this will still be slower than the 3.8% logged in February 2019.

The BSP has an inflation target of 2-4% for the year and sees the rise in prices averaging at 3%.

The Philippine Statistics Authority will report February inflation data on Thursday, March 5.

Economists said the uptick in food prices continues to be an upside risk to inflation.

“The negative impact on agricultural production and supply-side disruptions arising from adverse weather remains an upside risk to inflation in the coming months,” Thatchinamoorthy Krshnan, an economist at Oxford Economics, said.

“Near-term upside risks to inflation include cost-push pressure from rice as Vietnam’s rice export prices climb on strong demand, while Thailand is poised to reduce exports due to a drought,” Security Bank Corp. Chief Economist Robert Dan J. Roces said.

For his part, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the African Swine Fever (ASF) outbreak will continue to contribute to the rise in the prices of some pork substitutes.

“The ASF, which recently spread for the first time in Mindanao, could lead to higher prices of pork, fish, and alternative meat products, partly due to lower swine production amid some culling made to prevent the ASF from spreading further,” Mr. Ricafort said.

The Department of Agriculture has prescribed a “1-7-10” protocol that has been implemented in parts of Mindanao. The quarantine procedure prescribes that hogs within a one-kilometer radius of the outbreak be immediately culled and buried, and the area disinfected. Those that are within the seven-kilometer radius will be under surveillance and subject to sampling and testing, while a strict monitoring of entry and exit points is implemented for those within 10 kilometers.

On the other hand, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said subsiding effects of the Taal Volcano eruption may have been a downside to inflation last month.

“Taal Volcano’s alert level was downgraded to ‘3’ last Jan. 26, and with it is the dissipation of the upward pressure on food and produce prices as supplies expected to have tightened momentarily,” Mr. Asuncion said in an e-mail.

Lower oil prices due to tepid demand amid the coronavirus outbreak could be a downside risk to inflation, according to analysts.

“The main impact of the coronavirus on inflation will have been the steep falls in the oil price we’ve seen,” Capital Economics’ Asia Economist Alex Holmes said.

Reuters reported that oil prices continued to slump for the sixth straight day last Friday to hit their lowest in more than a year, with markets reacting to the rising COVID-19 cases outside China.

The world’s biggest oil exporter, Saudi Arabia, will be cutting its crude supplies to China this month by at least 500,000 barrels per day on the back of slower refinery demand due to the outbreak, two sources with knowledge of the matter told Reuters.

Likewise, the further spread of COVID-19 could also dent consumption demand which could put downward pressure on inflation, said De La Salle University Economist Mitzie Irene P. Conchada.

“Inflation could slow down as the demand for goods, travel, tourism and related services deteriorate brought about by apprehensions toward the (COVID-19) spread,” Ms. Conchada said in an e-mail.

Analysts also said lower electricity prices likely offset higher food prices in February.

Manila Electric Co. (Meralco) earlier said typical households would see a P118 cut in their February bills after new power supply deals helped bring down the cost of electricity.

“A fall in global crude prices and a reduction in Meralco rates offered some partial offset,” ANZ Research Economist Mustafa Arif said in an e-mail.

The utility fee decrease for the second straight month this year brings the cost of power to its lowest in two years, Meralco said. — with Reuters

Analysts’ February Inflation Rate Estimates