Philippines: Economists see spike in inflation
Average 4.3% forecast exceeds gov’t target
MANILA, Philippines — Economists of private banks hiked their inflation forecast to 4.3 percent from the original target of 4.1 percent, higher than the central bank’s two to four percent target this year amid upward price pressures, according to the Bangko Sentral ng Pilipinas (BSP).
Zeno Ronald Abenoja, managing director of the BSP’s Department of Economic Research, said inflation expectations point to above-target inflation for this year.
“Supply-side shocks are driving inflation higher in the third quarter, with risks in the near-term skewed toward the upside,” he said.
Based on the results of the central bank’s survey of private sector economists for September, analysts expect inflation to remain slightly above the upper end of the government’s target range for this year, with broadly balanced risks surrounding the outlook.
Based on the probability distribution of the forecasts provided by 17 out of 21 respondents, there is a 17.2 percent probability that average inflation for 2021 would settle within the two to four percent range, while there is an 82.3 percent chance that inflation would rise above four percent.
Gokongwei-led Robinsons Bank, Gotianun-owned EastWest Bank, Al-Amanah Islamic Bank, and Mizuho see inflation averaging 4.5 percent this year, while Sy-led BDO sees inflation hitting 4.45 percent.
San Miguel-owned Bank of Commerce, think tank Global Source, Korea Exchange Bank, state-run Land Bank of the Philippines, Philippine Equity Partners, Yuchengco-owned Rizal Commercial Banking Corp. and Aboitiz-led UnionBank expect inflation to average 4.4 percent.
Standard Chartered Bank has the lowest inflation forecast for this year at 3.9 percent.
The upside risks to inflation include supply disruptions brought about by the reimposition of stricter quarantine measures, adverse weather conditions during the rainy season, and persistence of African swine fever.
Other price pressures include rising global crude oil prices as well as the weakening of the peso against the dollar.
On the other hand, downside risks to inflation are seen to emanate mainly from subdued domestic demand due to low purchasing power brought about by high unemployment as well as the prolonged and stricter lockdown measures amid the local transmission of the Delta variant.
Another downside risk revolves around increased food importation following the implementation of lower import tariffs on pork and rice, which are seen to augment domestic food supply and lower food prices.
Abenoja said the BSP and private economists see inflation returning to the target in 2022 and 2023.
Economists expect inflation to average 3.2 percent in 2022 and 3.2 instead of 3.1 percent in 2023.
The probabilities that inflation would fall within the target band in 2022 and 2023 are seen at 84.2 percent and 86.7 percent, respectively.
Dennis Lapid, director of the BSP Monetary Policy Research Group, said the Monetary Board sees inflation averaging 4.4 percent this year before easing to 3.3 percent in 2022 and 3.2 percent in 2023.
The BSP has emerged as one of the most aggressive central banks in the world, slashing interest rates by 200 basis points to an all-time low of two percent last year and lowering the reserve requirement ratios.