The Bangko Sentral ng Pilipinas (BSP) projects inflation this month to settle within 2.3 to 3.1 percent due to possible higher food prices.

“Upward price pressures in December could stem from increased prices of major food items owing to the supply disruptions from recent weather disturbances, as well as higher electricity rates and petroleum prices,” BSP said in a statement.

Last month, overall inflation hit 2.5 percent as prices of vegetables, meat, seafood and non-alcoholic beverages increased from 2.9 percent to 3.4 percent based on data from the Philippine Statistics Authority.

Socioeconomic Planning Secretary Arsenio Balisacan said the higher food prices reflected higher transportation costs of agricultural goods and slower farm production after three typhoons damaged and flooded roads.

However, BSP said rice prices could temper growth in overall inflation as the government continues to impose a lower tariff on imported rice at 15 percent from 35 percent.

National statistics showed rice prices last month declined to 5.1 percent from 9.6 percent as cheaper rice imports helped ensure enough supply of the commodity.

Power, fuel may spur prices

Aside from certain food items, BSP said overall inflation could rise from higher electricity and fuel prices.

From January to 16 December the Department of Energy (DoE) said gasoline prices already rose by P11.35 per liter while diesel prices increased by P9.55 per liter.

Starting 17 December, DoE said consumers would experience an increase of P0.15 to P0.45 per liter for gasoline and P0.10 to P0.40 per liter for diesel.

DoE-Oil Industry Management Bureau Assistant Director Rodela Romero said global energy prices increased as market analysts project higher consumer demand.

With these inflationary risks, BSP expects the average inflation for the full year to hit 3.2 percent, which falls within its target band of 2 to 4 percent.

Bank of the Philippine Islands chief economist Emilio Neri Jr. said global oil prices might decline next year as returning US president Donald Trump urges American oil manufacturers to boost production.

“Meanwhile, China’s surplus manufacturing capacity might also lead to an influx of cheaper imports into the Philippines, which could further curb inflationary pressures,” he added.