POLICIES ON SUPPLY SUFFICIENCY, AGRI PRODUCTIVITY NEEDED TO MAINTAIN MANAGEABLE INFLATION GROWTH – NEDA

MANILA—Inflation rate slowed to 4.4 percent in June 2014 from 4.5 percent in May, supporting a manageable and within-target outlook for the year, according to the National Economic and Development Authority (NEDA).

“NEDA expects that the country’s headline inflation rate for full year 2014 will average around 4.4 percent, still within the Development Budget Coordination Committee’s full year target of 3.0 to 5.0 percent,” said Economic Planning Secretary Arsenio M. Balisacan.

Decelerating growth in prices of non-food items tempered the inflation rate in June 2014. However, faster growth in food prices pushed up the rate at the higher end of the target.

“One of the main reasons for the high price of food is the rather sharp increases in rice prices in June 2014 as supply tightness persisted in the market,” the Cabinet official said.

But despite the outlook of manageable and within-target inflation growth for 2014, there are risks along the way such as weather disturbances, pests and diseases, pending petitions for adjustments in utility rates, and the still elevated growth of domestic liquidity.

“In the short term, the interventions can focus on ensuring supply adequacy by allowing sufficient levels of imports to augment local production of rice and other key commodities. The truck ban policy also needs to be reviewed, along with other measures needed to improve the efficiency of distribution systems,” said Balisacan, who is also NEDA Director-General. 

Also, given the increasing probability of El Nino beginning the third quarter of 2014, Balisacan reiterates the need to intensify government programs to curb the adverse impact of a prolonged dry spell.

“In the medium term, implementation of programs to increase the productivity of agriculture and the food processing industries need to be accelerated. The wider use of appropriate technology, especially in production areas vulnerable to drought and floods, also needs to be encouraged,” he said.

In line with this, Balisacan said that Public-Private Partnership programs may be considered to put up cold chain systems.

“The concept of using cold chain technologies in the agriculture sector should be done on a gradual basis, from some selected operations and for the whole distribution chain,” he said. 

Meanwhile, aside from headline inflation, core inflation which nets out fuel and certain food items also decreased to 2.8 percent in June 2014, lower compared to 3.1 percent in May 2014. For the first six months in 2014, core inflation averaged at 3.0 percent.

Also, inflation rate in the National Capital Region (NCR) decreased to 3.6 percent in June 2014, slower than the year-on-year rate of 3.8 percent in May 2014. In Areas Outside NCR, inflation rate remained stable at 4.7 percent in June 2014, the same level in May 2014.