Philippines: BSP survey shows higher 2022 inflation
A BANGKO Sentral ng Pilipinas (BSP) survey of private sector economists conducted in August 2022 showed that inflation predictions for this year remain on the high side.
According to BSP’s Monetary Policy Report for the month of August released this weekend, private sector experts predict that inflation w ill continue to climb this year before going down in the next few years.
BSP also expects that the country’s inflation rate would average 5.4 percent this year, 4.2 percent the following year and 3.7 percent in 2024. The central bank also expects that inflation would exceed the government’s target range in 2022.
Factors to issues that hinder the production of goods and services, and their delivery to markets, the continued depreciation of the peso against the US dollar, and “second-round effects” are seen affecting the country’s inflation rate.
“Second-round effects happen when inflation caused by supply side factors — such as higher global oil prices that result in more expensive production of other goods and services — persist, thereby prompting an increase in wages and transport fares as well,” explained BSP.
When supply side issues like rising global oil prices that increase the cost of producing other goods and services persist and cause inflation, this also increases wages and transportation costs.
Meanwhile, BSP mentioned in the same Monetary Policy Report that inflation may reach its high in the third quarter of this year, adding that it would continue to rise until the second quarter of the following year.
According to BSP, inflation is likely to slow down and settle within the target range by the third quarter of next year, as global oil and non-oil prices start to ease.
The BSP’s policy rate hikes would also help ease inflation in the second half of next year.
More specifically, BSP pointed out that inflation would average 5.4 percent this year, up from the prior estimate of 5 percent released on June 23, 2022.
In contrast, the annual inflation prediction for 2023 is 4 percent, which is less than the prior projection of 4.2 percent made public in June.
Inflation is anticipated to average 3.2 percent in 2024, less than the previous prediction of 3.3 percent, the BSP added.
High non-oil global prices, the ongoing shortage of fish supply, the sudden rise in sugar costs and pending applications for higher transportation fares are some factors that could cause inflation to rise.
While this is happening, a slower-than-anticipated global recovery and a rise in local Covid-19 infections may reduce demand and moderate inflation.