Higher electricity, gas prices push up inflation in March 2017

By on April 5, 2017


“Higher electricity rates are expected to persist in the next two months as the Energy Regulation Commission (ERC) will spread the additional cost from the use of liquid fuel, which is more expensive than natural gas, until May 2017,” the Cabinet official said. (Photo: abhisawa/ Flickr)
“Higher electricity rates are expected to persist in the next two months as the Energy Regulation Commission (ERC) will spread the additional cost from the use of liquid fuel, which is more expensive than natural gas, until May 2017,” the Cabinet official said. (Photo: abhisawa/ Flickr)

MANILA–Inflation in March 2017 rose to 3.4 percent from 3.3 percent in the previous month due to higher prices of electricity, gas and other fuels, according to the National Economic and Development Authority (NEDA).

The first three months of 2017 saw the Philippine’s inflation rate trending upwards, partly due to recent hikes in food and oil prices and also owing to a generally low base in 2016.

Inflation in March 2017 was the fastest since November 2014, but still within government’s target for the year and the median market expectation of 3.4 percent for the month.

“Upward risks to inflation remain, but the overall outlook continues to be within government’s 2.0 to 4.0 percent target range for this year and next,” said Socioeconomic Planning Secretary Ernesto M. Pernia.

Inflation in the non-food group accelerated to 2.8 percent from 2.5 percent in February 2017, and from 0.4 percent in March 2016.

This was mainly due to the faster year-on-year price adjustments of electricity, gas, and other fuels, which hiked to 9.3 percent.

The hike was partly caused by a 20-day maintenance shutdown in the Malampaya Gas Field, shutting down three power plants—Ilijan, Sta. Rita and San Lorenzo.

The shift to liquid fuel from natural gas pushed up household electricity rate to Php 9.67 per kWh

“Higher electricity rates are expected to persist in the next two months as the Energy Regulation Commission (ERC) will spread the additional cost from the use of liquid fuel, which is more expensive than natural gas, until May 2017,” the Cabinet official said.

Other sub-commodity groups that pushed inflation of non-food items upwards were furnishing, household equipment, and routine maintenance of the house at 2.5 percent from 2.3 percent, and health at 2.8 percent from 2.6 percent.

Meanwhile, inflation in the food group decelerated to 4.2 percent in March 2017 from 4.3 percent in the previous month

This was due to slower price adjustments in fish, fruits, vegetables, sugar, jam, honey, chocolate, and confectionery, and other food products.

However, inflation in rice and meat accelerated to 2.3 percent and 3.2 percent, respectively. Both could be due to importation constraints imposed by the government.

“Inflationary pressure may ease following the removal of quantitative restrictions (QR) on rice importation, and the timely augmentation of supplies. However, the likely recovery of international and petroleum prices in 2017 may keep consumer prices afloat,” Pernia said

He added that possible adjustments in transportation fares and electricity rates in the coming months could exert upward pressure on prices.

The continued depreciation of the Philippine peso against the US dollar may exert upward push on the cost of basic commodities and services.

“The recent upward trend in inflation needs to be closely monitored. The government needs to implement timely mitigating measures to ensure that prices remain stable,” said Pernia.