Inflation remains manageable – DOF
Mary Grace Padin (The Philippine Star) - December 7, 2017 - 4:00pm

MANILA, Philippines — The Department of Finance (DOF) expects inflation to remain manageable in the coming months given the solid macroeconomic fundamentals of the country, its chief economist said yesterday.

In a statement, Finance Undersecretary Gil Beltran said inflation currently remains at a comfortable level, with the consumer price index growing an average 3.13 percent in the first 10 months of the year.

Beltran said this is below the annual average inflation of 3.16 percent over the past seven years.

“The consumer price index or CPI is the most watched indicator for price movements. From 2010 to 2016, during the period when the economy grew by 6.3 percent annually, CPI inflation averaged 3.16 percent. During the first 10 months of 2017 when the economy grew by 6.7 percent, CPI inflation averaged 3.13 percent, slightly lower than the seven-year average,” Beltran said.

Inflation settled at a three-year high 3.5 percent in October, higher than 3.4 percent a month earlier and 2.3 percent in the same month in 2016. However, inflation in November has slightly slowed down to 3.3 percent.

Beltran, the DOF’s chief economist, said inflation is projected to continue settling at a favorable level owing to good macroeconomic fundamentals.

He said inflation could be tamed successfully, if the country improves its production to keep up with the growing population and rising income.

 “This implies maintaining good macroeconomic fundamentals. This means that government should continue to spend for infrastructure and social services and that the Bangko Sentral ng Pilipinas should maintain a level of money supply appropriate for the goods and services produced by the economy,” he said.

Beltran also said the government must continue its efforts to improve agricultural productivity to temper its impact on inflation. He said this could be done by putting up the needed infrastructure for the sector, such as farm-to-market roads and irrigation, and intensify the extension services of the Department of Agriculture.

He said the financial sector should also provide credit and guarantee services to farmers so replanting could be done immediately after typhoons.

Citing a 2014 study on the determinants of inflation conducted by the DOF, Beltran said economic growth, money supply and inflation expectations are among the key factors affecting inflation.

For example, he said a percentage point rise in real GDP reduces CPI by 0.77 percentage point. He said monetary policy also affects inflation.

Meanwhile, a percentage point in M3 or domestic liquidity growth also raises inflation by 1.8 percentage point.

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