Philippines' nasty weather to push inflation up 3.5%

Around PHP 693m worth of rice crops have already been lost.

According to DBS, the typhoon season has been challenging with monsoon rains pounding the main island of Luzon and flooding the capital city of Manila. While flood waters have largely subsided in Manila, several rice-producing provinces are still under water.

Here's more from DBS:

The authorities have been optimistic about the flood damage on crops thus far (PHP 693mn of rice crops lost) and it is estimated that the country need not increase its rice import target of 500,000 metric tons this year.

In the short term, food price pressures bear watching. Local reports suggest that the price of raw food including vegetables and fish have risen significantly in the affected areas as transport disruptions persist. With the food and non-alcoholic beverage component making up a sizable 39% of the CPI basket, headline CPI could edge up to 3.5% YoY from 3.2% in the preceding month. For the full-year we are sticking to our 3.1% inflation forecast for now.

Prior the floods, official estimates put the expected paddy harvest at a record 17.8mn tons this year. If the flood damage to crops proves to be contained, the food price spike could prove temporary. Notably, average monthly inflation for the first seven months of the year is only at 3% and inflation is likely to still stay at the bottom half of the central bank’s (BSP) 3-5% target.