stock-commentarymb_2021-11-17_08-59-59

Philippines: BSP forecasts February inflation range of 8.5% to 9.3%

  • Mar 03, 2023

The Bangko Sentral ng Pilipinas (BSP) [link], our central bank, said that it expects February inflation to “settle” between 8.5% and 9.3%. Noting that inflation is “still elevated”, the BSP said that the largest upward price pressures would continue to come from LPG prices and basic food items like meat, fish, eggs, and sugar.

Due to January’s unexpectedly high prices, the BSP thinks that the month-on-month inflation in February will show “an improvement because January was already high”, with the BSP’s Senior Assistant Governor, Iluminada Sicat, predicting that February’s m/m inflation will be lower than what we saw in terms of inflation growth between December and January.

MB BOTTOM-LINE

I think all of this horse-trading on what the “number” will be, and how much of a one-time payment the government should give to the poorest of Filipinos, glosses over the main point that I think is being lost in this discussion. That is this: prices aren’t going down. And when the BSP and the government talks about getting inflation back down into its target range of 2% to 4%, that’s relative to insanely high price levels that we have right now.

Take whatever the overall price of the “basket of goods” was back in January that caused us all to exclaim with shock at the high rate of inflation, and consider that the government’s objective is to “only” allow prices to rise a maximum of 4% above that number. That, if it happens, will be considered a victory. The price of the basket of goods will not get cheaper. Some things will get better, others will get worse, but the overall “basket of goods” is going to be more expensive. And it will be 2% to 4% more expensive in January 2024 than it was in January 2023.

How will this new reality impact purchasing decisions of regular families going forward? We know that prices are climbing faster than wages. How will those decisions change as prices remain this high, and higher, year after year after year? I know many families who talk about waiting this wave of inflation out, as though it’s some kind of storm that’s going to pass, but that’s now how this works. Something that costs you P100 today, that cost you P94 last year, will cost you P104 next year, and that’s if we’re lucky. 

Source: https://www.philstar.com/business/stock-commentary/2023/03/03/2249010/bsp-forecasts-february-inflation-range-85-93