Experts see inflation to still peak in October

CONTRARY to economic managers’ expectations that inflation will finally taper off in the fourth quarter, economists believe inflation may still peak in October. 

This, as inflation in September soared to a new nine-year high at 6.7 percent, bringing year-to-date inflation at 5 percent. 

This is already above the government’s inflation target at 2 to 4 percent for the year. 

Economist Calixto V. Chikiamco, president of  the Foundation for Economic Freedom (FEF), said inflation will still go up in October on the back of rising oil prices.

“Inflation may yet peak in October because of higher oil prices but should moderate in November and December because of massive rice importation,” Chikiamco told the BusinessMirror in a message. “In fact, we saw inflation in NCR [National Capital Region] moderating already.”

Inflation in NCR slowed down to 6.3 percent in September, from 7 percent in August. 

Asked if he thinks inflation in October will more likely breach 7 percent, Chikiamco said: “At this time, no. But again depending on [the] situation in Middle East.”

Moreover, he noted that it is more likely that inflation will not slow down, considering Iran sanctions will bite in November and jeepney operators are asking for higher fares. 

If the wave of US sanctions targeting Iran’s oil and gas industry cuts Iranian oil supply completely, oil prices are seen to reach above $100 per barrel, according to an
industry expert.

Iran is the third-largest oil producer among the members of the Organization of the Petroleum Exporting Countries.

De La Salle University Economics Prof. Maria Ella C. Oplas also thinks that inflation in the fourth quarter, or from October to December, will likely be faster than the 6.7 percent posted in September.

“I don’t think inflation will go down on the fourth quarter. Historically, inflation for the fourth quarter really goes up because of spending related to the Christmas season. Therefore, I wouldn’t be surprised if it continues to increase,” Oplas said.  However, she also agreed with Chikiamco that it will likely not breach 7 percent because people will hold on to their money instead of spending. 

“When people stop spending…inflation slows down,” she said in a message to the BusinessMirror. Last week analysts also said the executive issuances released by Malacañang on removing nontariff  barriers and streamlining administrative procedures on importation can help moderate inflation, but they also believe the government must exert more effort in improving agriculture in order to fully address the problem, especially for the medium to long term.

Growth dampeners

Chikiamco also argued that inflation, anemic agricultural growth and higher interest rates will again spoil the country’s growth for the third quarter. 

“[I] agree with [Budget Secretary] Ben [Diokno’s] assessment of GDP growth. Our agriculture remains our weak spot,” he said. 

Earlier, Diokno said the country’s GDP will likely grow by only at least 6 percent, as agriculture remains to be the weakest link of the economy. 

For Jose Enrique A. Africa, IBON Foundation executive director, it is already “virtually impossible” for the government to achieve the 7.7-percent GDP growth in the second semester in order to meet its 7 to 8 percent growth target for the year. 

“Inflation is accelerating, the peso is falling, oil is getting more expensive, interest rates are rising, remittances are slowing, and net exports are faltering,” Africa said. “Political instability is also growing with paranoid anti-government conspiracies and concerns about the real state of the President’s health. It is difficult to see even the acclaimed infrastructure offensive overcoming these.”

With these headwinds, Africa said it would be a “surprise if inflation moderates much in the fourth quarter.”

Nonetheless, IBON reiterated its call for the government to suspend the Tax Reform for Acceleration and Inclusion (TRAIN) law, which is blamed for the rising consumer prices.

IBON also suggested that the government implement price ceilings on basic necessities and prime commodities. 

“Doing these would have sent a strong signal of the administration’s sincerity in addressing rising prices and would bring immediate relief for tens of millions of Filipinos,” the group said in a statement. 

Meanwhile, resigned chief of the National Anti-Poverty Commission (NAPC) Liza Maza also agreed with Africa on the repeal of the “regressive” TRAIN law, as this landed more Filipino families in greater poverty due to the rise in food prices. 

  Maza said that a recent simulation by NAPC revealed that a 5-percentage-point rise in food inflation rate would already give rise to at least 330,000 new poor households. 

Data from the Philippine Statistics Authority showed that food inflation in September was posted at 9.7 percent, a 6.1-percentage-point increase from the same month of last year at 3.6 percent. 

“The spike in food prices and the implementation of the TRAIN law are by no means coincidental,” she said, adding that she found it “disturbing that the government’s economic managers continue to downplay, if not entirely dismiss, the impact of TRAIN on ballooning inflation….”

She then urged the government to come up with a truly progressive tax system that is based on the individual’s capacity to pay. 

“We can no longer deny the ongoing crisis—and the government must take immediate and concrete steps to address this,” she added. “The TRAIN law will continue to hurt the poor even more in the coming days, unless we finally make it stop.”


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Bernadette D. Nicolas currently covers Malacanang, Consultative Committee tasked to review 1987 Constitution, Department of Budget and Management and Philippine Competition Commission. She has more than 2 years experience of working with a multiplatform media group before transferring to BusinessMirror in February 2018. She earned her Journalism degree at University of Santo Tomas in 2014.


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