By Keisha B. Ta-asan
HIGHER daily minimum wages and jeepney fares will likely drive inflation beyond the central bank’s target this year, analysts said.
The Bangko Sentral ng Pilipinas (BSP) reiterated it is keeping a close eye on the inflation spike’s second-round effects such as wage and transport fare increases.
“The BSP is prepared to respond to a sustained buildup of inflation pressures and second-round effects that can disanchor inflation expectations,” BSP Governor Benjamin E. Diokno said at the launch of the World Bank Philippines Economic Update June 2022 report on Thursday.
Inflation jumped to 5.4% in May, faster than 4.9% in April and 4.1% a year ago, as food and fuel prices continued to climb amid the prolonged Russia-Ukraine war.
The BSP last month raised its average inflation forecast for 2022 to 4.6% from 4.3%, exceeding the 2%-4% target.
The implementation of a daily minimum wage hike in 14 regions and a P1 increase in fares for public utility jeepneys in Metro Manila, Central Luzon, Calabarzon and Mimaropa this month will likely add to inflationary pressures.
Starting June 4, the new minimum wage in Metro Manila increased by P33 to P570 for non-agricultural workers and P533 for agricultural workers.
These hikes will further accelerate inflation this month, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in a Viber message
“I am pretty sure this contributes to headline inflation’s rise for this June and the coming months. We still expect average 2022 inflation at 4.7% and 4% in 2023… How June inflation looks like, I believe, will definitely make a re-think possible. At this point, we expect June inflation at 5.8%,” Mr. Asuncion said.
The National Economic and Development Authority (NEDA) in March estimated that a P1.25 increase in jeepney fares would increase inflation by 0.4 percentage point. A P39 increase in the daily wage in Metro Manila would lead to a one percentage point increase in inflation, it added.
“Given that the fare hike is limited to NCR (National Capital Region) and Regions 3 and 4 so far, the impact might currently be less than (the NEDA’s earlier estimates). However, we think that transport fare hikes in other regions might similarly be approved soon as pump prices remain elevated,” China Banking Corp. Chief Economist Domini S. Velasquez said.
Security Bank Corp. Chief Economist Robert Dan J. Roces said higher fares increase the risk of price hikes this year.
“The projection is that inflation is already poised to remain above target for the rest of the year. There may be shifts to consumption nonetheless, for instance less of selected foods in favor of higher transport costs as the Filipino’s budget shrinks,” he said.
Incoming BSP chief Felipe M. Medalla has signaled at least two more rate hikes to curb inflation.
The Monetary Board is set to review policy settings on June 23.
Meanwhile, the Zamboanga Peninsula Regional Tripartite Wages and Productivity Board has approved a new daily minimum wage for the region.
In a statement, the Department of Labor and Employment (DoLE) said the Zamboanga wage board had ordered a P35 daily minimum wage increase for nonagricultural workers, and a P20 hike for agricultural workers.
If approved by the National Wages and Productivity Commission, the daily minimum wage for nonagricultural workers will rise to P351 from P316.
The daily pay of agricultural workers employed by an establishment with more than 10 workers will rise to P338 from P303. The daily wage for those who work in agricultural enterprises and establishments with fewer than 10 workers will rise to P323 from P303.
Domestic workers in the region will also get a P500 hike, bringing the monthly wage to P4,000 for first-class municipalities.
The DoLE said about 30,513 workers in private establishments and 18,984 domestic workers are expected to benefit from the minimum wage increases.
In a separate statement, DoLE said it had ratified the 1986 Instrument of Amendments to the Constitution of the International Labor Organization (ILO). The amendment calls for increasing the number of nonobserver countries in the global labor body.
“This is a step closer to its entry into force towards democratization in the organization with the end in view of realizing our shared vision of leaving no one behind in the world of work,” Labor chief Silvestre H. Bello III said at the ILO conference held in Geneva, Switzerland. — with John Victor D. Ordoñez