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Philippines: Inflation forecasts for 2022 hiked
MANILA, Philippines — Economists raised their inflation forecasts for this year, but prices are seen to remain slightly above the midpoint of the government’s two to four percent target range, according to a survey conducted by the Bangko Sentral ng Pilipinas (BSP).
In a report, IHS Markit Asia-Pacific chief economist Rajiv Biswas said the Philippines may experience rapid economic growth in the next decade with gross domestic product (GDP) hitting $1 trillion or P51.1 trillion by 2033.
For 2023, the respondents of the survey conducted by the BSP from Dec. 9 to 13 expect a lower inflation of 3.2 percent instead of 3.3 percent.
“Analysts expected average inflation to return close to the midpoint of the target by 2022 and 2023,” the BSP said in its Fourth Quarter 2021 Inflation Report.
The BSP said that 74.8 percent of the 20 respondents believe inflation would fall within the BSP’s two to four percent target range this year and a higher 80.4 percent for next year.
According to the respondents, upside risks to inflation include election-related spending, less stringent quarantine measures and normalization of business activities given the improved pace of vaccinations to boost domestic demand, and increased government spending on infrastructure.
Other factors that may put pressure on consumer prices include the persistently high global oil prices that can result in higher transport costs as well as supply chain disruptions due to the pandemic.
Al-Amanah Islamic Bank has the highest inflation forecast for this year at 4.5 Inflation…percent, followed by EastWest Bank at four percent, Bangkok Bank at 3.75 percent, as well as state-run Land Bank of the Philippines and Philippine Equity Partners at 3.7 percent.
On the other hand, Korea Exchange Bank has the lowest inflation forecast for 2022 at 2.5 percent, followed by Maybank-ATR Kim Eng at 2.8 percent and Nomura at 2.9 percent.
Furthermore, the survey showed most of the analysts anticipate the BSP to hike the key policy interest rate by 25 to 150 basis points in 2022 and 2023.
In a letter sent to Malacañang due to an inflation breach last year, BSP Governor Benjamin Diokno said inflation would return to within the government’s two to four percent target range in 2022 and 2023.
Diokno said the continued and effective implementation of direct non-monetary interventions and policy reforms to alleviate supply constraints remains crucial in keeping the trajectory of inflation within the target band, particularly as risks to the inflation outlook appear to be slightly on the upside for 2022.
“These risks are mostly associated with a prolonged shortage in domestic pork supply, along with higher global commodity prices due to improving global demand amid lingering supply-chain bottlenecks,” Diokno said.
On the other hand, the BSP chief said downside risks to the inflation outlook continue to emanate from the spread of new COVID variants, which could delay the further easing of remaining containment measures, as well as dampen the outlook for global and domestic economic growth.
However, he said the inflation outlook is subject to a considerable level of uncertainty given developments relating to the pandemic, which could affect domestic and external economic conditions going forward.
Source: https://www.philstar.com/business/2022/01/31/2157454/inflation-forecasts-2022-hiked