THE better-than-expected inflation print in September has raised the optimism of the economic team enough to consider an upward revision in the targets set by the Development Budget Coordination Committee (DBCC).
At the sidelines of the launch of the Public Financial Management Reforms Roadmap 2024 to 2028, Secretary Amenah Pangandaman of the Department of Budget and Management (DBM) said given the new development, she has already asked the economic team if they can hold a special DBCC meeting again.
Pangandaman said the “special” or “off-cycle” DBCC meeting will focus on examining the latest numbers and reviewing the targets, with the possibility of revising them upward.
“It’s a special meeting, off-cycle meeting. [It may held] this quarter. Especially that the budget is going to be passed soon. So maybe we can review again our targets and hopefully we will catch up on all the targets that we have,” Pangandaman told reporters.
The DBCC Secretariat told BusinessMirror that in practice, the DBCC holds regular meetings in the first, second, and fourth quarters of the year. Nonetheless, the DBCC can hold special meetings as needed.
There is usually no third quarter DBCC meeting due to “budget authorization.” And, for the fourth quarter of the year, the DBCC meeting is usually held in December.
Meanwhile, Pangandaman said she hopes the country will be able to sustain the downtrend in inflation. If this is sustained, there’s a higher chance that the country can post even faster economic growth this year.
She noted that apart from lower inflation, the economic team also considers higher public spending toward the end of the year as a major contributor to the economy’s improved performance.
“We’re very happy. So I think all our reforms are taking place now. It’s a success, obviously. The tariff, all our other interventions. So we’re happy. We’re very happy. The President is very happy. The whole economic team is very happy,” Pangandaman said.
The budget utilization of national government agencies will also be monitored as a factor in the upward revision of the DBCC’s full-year growth target, Pangandaman added.
“Hopefully, the agencies are able to unload all their budget. By this time, their procurement should have been implemented already. I hope that contributes to our growth [again],” the Budget chief added.
In the second quarter of 2024, the economy grew by 6.3 percent at a faster-than-expected pace.
Next year, the DBCC estimates GDP growth to increase to 6.5 to 7.5 percent, while settling between 6.5 to 8 percent in 2026 to 2028.
In July, the DBCC set the country’s inflation target at 3 to 4 percent this year; and 2 to 4 percent between 2025 and 2028. GDP, meanwhile, is set at 6 to 7 percent in 2024; 6.5 to 7.5 percent in 2025; and 6.5 to 8 percent in 2026 to 2028.
Moody’s Analytics: Sustained decline
Meanwhile, Moody’s Analytics said inflation in the country is expected to continue to trend downward. It noted that the latest inflation print was also significantly lower than market expectations of 2.5 percent as well as the Bangko Sentral ng Pilipinas (BSP) forecast of 2 to 2.8 percent.
Moody’s Analytics also noted that core inflation, which excludes certain food and energy items, also eased to 2.4 percent from 2.6 percent in August 2024.
“With headline inflation on the downtrend, odds are high that the BSP will deliver another rate cut when the Monetary Board meets on 16 October,” Moody’s Analytics said.
Nomura Senior Economist Euben Paracuelles and Southeast Asian Economist Nabila Amani noted that on a seasonally adjusted basis, headline inflation has negative for two months in a row at -0.1 percent, unchanged from August 2024.
The decline was again led by food inflation, the economists said. Food inflation eased sharply to 1.4 percent year on year from 3.9 percent. Rice price inflation also dropped sharply to 5.7 percent from 14.7 percent, mainly due to base effects.
“[This] was also the main source of the downside surprise. In particular, prices of corn and vegetables fell more sharply than we expected, despite a recent typhoon,” the economists said.
“If prices of these items were close to our forecast, headline CPI would have been at 2.4 percent, which suggests the surprise was large and confined to only a few of the more volatile food items,” they added.
Last Friday, the Philippine Statistics Authority (PSA) disclosed that the country’s inflation rate averaged 1.9 percent in September, the lowest in four years or since the 1.6 percent posted in May 2020.
The inflation recorded by food and non-alcoholic beverages slowed to 1.4 percent in September 2024. This commodity group posted an inflation rate of 3.9 percent in August 2024.
National Statistician Claire Dennis S. Mapa said the slowdown in inflation was driven by cheaper food and non-alcoholic beverages, which accounted for 69.1 percent of the downtrend.
Rice prices alone only posted an inflation rate of 5.7 percent, the slowest since the 4.2 percent posted in July 2023. (See: https://businessmirror.com.ph/2024/10/05/surprise-inflation-in-september-at-1-9-a-4-year-low/)
Image credits: PNA Photo
