INFLATION likely eased further in March as the plunge in oil prices was seen to offset a slight uptick in food prices due to a spike in demand caused by the enhanced community quarantine (ECQ) in Luzon.

A BusinessWorld poll of 11 economists held this week yielded a 2.3% median estimate for March headline inflation, closer to the lower end of the Bangko Sentral ng Pilipinas’ (BSP) 2-2.8% estimate given on Tuesday.

If realized, March will mark the second consecutive month of easing inflation coming from the 2.6% seen in February, and will also be markedly slower than the 3.3% logged in March 2019.

The central bank has a 2-4% inflation target for 2020 and 2021. It lowered last month its inflation average forecast for this year to 2.2% from 3% mainly due to the lower price trend in recent months, a sharp decrease in oil prices, as well as the economic impact of the coronavirus disease 2019 (COVID-19) across the world.

The Philippine Statistics Authority will report March inflation data on Tuesday (April 7).

Analysts said the dramatic plunge in oil prices last month likely affected inflation.

“My forecast is 2.4% since the huge fall in fuel prices will more than offset the slight increase in food prices (which may rise due to logistics problems due to COVID-19),” Victor A. Abola, economist at the University of Asia and the Pacific, said.

Oil prices started to free-fall in March as Saudi Arabia brought its selling price down and tried to engage in a price battle with Russia, while demand continued to drop as the COVID-19 outbreak worsened. Late last month, US President Donald J. Trump and his Russian counterpart Vladimir Putin agreed to discuss stabilizing energy markets.

Mitzie Irene P. Conchada, an economist from De La Salle University, also sees declining oil prices amid lower demand due to production cuts in manufacturing and a halt in the services sector.

“The enhanced community quarantine in the country and in most parts of the world will continue to affect production,” Ms. Conchada said in an e-mail.

The month-long Luzon lockdown, scheduled to end on April 12, is meant to prevent the further spread of the virus. The government ordered the temporary shutdown of public transportation, schools and most businesses, except those related to basic goods and services, including groceries, pharmacies, hospitals and banks, among others.

“Reduced business and economic activities due to lockdowns locally and in many countries around the world could fundamentally help ease/lower inflation eventually, going forward,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

Meanwhile, Jiaxin Lu, an economist from Continuum Economics, said the implementation of a price freeze also likely slowed inflation.

“Food prices likely stabilized in March, partly due to the two-month price freeze act by the Philippine government to control prices amid COVID-19 crisis,” Ms. Lu said.

Prices of basic necessities are frozen from March 16 until May 15 following the declaration of a six-month state of calamity due to the COVID-19 outbreak.

Security Bank Corp. Chief Economist Robert Dan J. Roces, however, said risks of lower rice supply amid the outbreak could stoke inflation in the near to medium term.

“Near to medium-term upside risks to inflation could emanate from rice as Vietnam, the country’s major source of imported rice, halted new rice export contracts as it reviewed their stocks,” Mr. Roces said.

The government is planning to import 300,000 metric tons of rice to ensure there is enough domestic supply during the lockdown.

Aside from this, Mr. Roces warned logistical problems due to the lockdown could threaten food supply.

“Manila ports have also been choked by unclaimed cargo that could cause the terminal to shut down and hamper supply chains and threaten the food supply if logistics solutions are not drawn up soon,” Mr. Roces said.

“Finally, cost-push inflation could happen with slowing output and higher unemployment should the enhanced community quarantine get extended indefinitely,” he added.

Health officials reported that COVID-19 patients in the country reached 2,633 as of Thursday with deaths hitting 107. — Luz Wendy T. Noble

Analysts’ March inflation rate estimates (2020)