Inflation 10-month average lower than 7-year average: DOF

December 7, 2017

Inflation remains at a comfortable level as its average of 3.13 percent from January to October is lower than the annual average of 3.16 percent for the last seven years, Finance Undersecretary Gil Beltran said in a statement on Thursday.

Beltran, the DOF’s chief economist, reported to Finance Secretary Carlos Dominguez III that even if the government continues with its massive spending on infrastructure projects under the P8.44-trillion “Build, Build, Build” program, inflation would continue to be at a favorable level owing to the country’s good macroeconomic fundamentals.

“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 7-year average,” said Beltran.

Beltran further said in his report to Dominguez that inflation could be tamed successfully should the country’s production continue to grow to keep up with  rising population and growing incomes.

“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.

To counter the high and immediate impact of low agricultural production to inflation, Beltran said the government must continue putting up the needed infrastructure for the sector such as farm-to-market roads and irrigation, and appropriate extension services by the Department of Agriculture.

The financial sector should also provide credit and guarantee services to farmers so that replanting can be done immediately after typhoons, he said.

Beltran also said food inflation mirrors the movement of the overall CPI. He said when the CPI Inflation spiked in 2014 at 4.18 percent, food CPI Inflation also spiked at its highest peak in a five-year period, posting 7.0 percent.

“It was observed that as food inflation rises, CPI Inflation also rises. For the first 10 months of 2017, food inflation averaged 3.8 percent, higher than the 2.1 percent in the same period of 2016,” Beltran said. DMS