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Supply chain disruption likely to cause price spikes — DoF

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THE PRICES of goods may spike, amid the disruption of global supply chains due to the continued spread of the coronavirus disease 2019 (COVID-19), the Finance department (DoF) said on Sunday.

“The disruption of global supply chains will tend to push prices up. Domestic producers will need to look for alternative supply sources to avoid production cuts,” the DoF said in its economic bulletin on Sunday.

Citing initial data from the Customs bureau, the DoF said imports from China dropped by 34.7% in terms of volume in February. China is the country’s biggest trading partner.

Inflation eased at a slower-than-expected 2.6% in February on softer price increases of food, transport and utilities, from 2.9% in January. This brought year-to-date inflation to 2.8%, well within the central bank’s 2-4% target for the whole year.

However, the DoF said “benign global oil prices will pull down inflation going forward.”

Oil prices have plunged to multi-year lows as demand was hit by economic fallout from the coronavirus. Virus fears, travel bans and other precautionary measures have dampened global economic activity.

For inflation rate to settle within the 2-4% target range, the DoF said the “month-on-month price change should be at most 0.3% per month.”

ASSESSING THE IMPACT
President Rodrigo R. Duterte is set to declare on Monday a public health emergency to help contain the spread of COVID-19, after the country recorded its first case of local transmission. There are six confirmed COVID-19 cases in the country as of Sunday.

Government economic managers are set to meet on Tuesday to further assess the virus outbreak’s impact on the economy following a rise in the number of confirmed cases in the country.

“Right now, what we see on the impact of COVID-19 is essentially on tourism and that’s very clear. What is not so clear is the impact on the productive capacity of our trading partners and the supply chain, and also the demand for our products — that’s quite unclear at the moment,” Finance Secretary Carlos G. Dominguez III told reporters on Friday.

Meanwhile, government officials said public infrastructure projects are not facing delays due to a shortage in raw materials and equipment, mainly from China.

“Right now we’re not seeing any effects yet, but we have to closely monitor that and then see the effects… on China, which supplies all of these construction materials, heavy equipment, for the entire world will be affected by this,” Vivencio B. Dizon, presidential adviser for flagship programs, said a press conference on Friday.

Mr. Dominguez said any slowdown will not be immediately seen as businesses typically have two or three months worth of inventory.

“You won’t see an immediate effect if there’s a slowdown because there’s inventory here. Let’s say they keep three months’ inventory, the slowdown started in, let’s say mid-February… It’s only in May that you’ll see the slowdown, if there is a slowdown at all,” Mr. Dominguez said. — Beatrice M. Laforga





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