Philippines: Inflation unexpectedly rebounds in August – UOB

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting assess the latest publication of inflation figures in the Philippines.

Key Takeaways

The Philippines’ headline inflation reverted higher to 5.3% y/y in Aug after easing for six straight months to 4.7% y/y in Jul. The reading defied our expectation of a slowdown to 4.6% and Bloomberg consensus of a steady rate at 4.7%. This outturn was particularly due to a sharp jump in prices of food and fuels following the transitory effects of two super typhoons (Egay and Falcon) striking the country last month. Costlier recreation, sports & culture related goods and secondary education services also contributed to the acceleration in Aug’s headline inflation.      

New circumstances such as the event of super typhoons, a further acceleration in global oil price above USD90/bbl, and emerging staple food supply shocks have posed a material change in the near-term inflation trajectory. This is in addition to lingering concerns about additional transport fare hikes, higherthan-expected minimum wage adjustments in other regions, and possible knock-on effects of higher toll rates on prices of key agricultural goods on the local front. Hence, we revise our full-year inflation forecasts back to our initial projections made in Feb, at 6.0% for 2023 (from 5.3% previously, BSP est: 5.6%, 2022: 5.8%) and 3.5% for 2024 (from 2.5% previously, BSP est: 3.3%). This upward revision also pushes back our earlier expectation of inflation returning to BSP’s 2.0%-4.0% medium target range to 1Q24 from 4Q23.