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Philippines: FMIC forecasts average inflation at 4.4% last year
MANILA, Philippines — Prices of goods and services likely averaged at 4.4 percent last year, the same forecast as the Bangko Sentral ng Pilipinas (BSP), but inflation is expected to start decelerating this 2022.
In its latest Market Call report, First Metro Investment Corp. (FMIC) and University of Asia and the Pacific (UA&P) Capital Markets Research said inflation likely surged to 4.4 percent in 2021 from 2.6 percent in 2020.
FMIC’s forecast is the same as the revised December target of the BSP.
“But this will likely ease to within the BSP target in 2022, as crude oil prices continue their downward trek, while supply chain difficulties get less entangled,” it said.
Inflation continued its deceleration, easing to 4.2 percent in November on cheaper food items but this remains elevated and has yet to return to the government’s target band.
The latest print, albeit lower, brought year-to-date inflation at 4.5 percent, still breaching the central bank’s 4.4 percent target for 2021.
The government will release the December inflation data on Jan. 5.
FMIC expects inflation to go below four percent in December as local petroleum product prices fell sharply and food inflation eased.
“We do not see food prices continuing their upswing and crude oil prices have plunged and retained a rather sideways movement thereafter,” it said.
This would prompt inflation to further head southward which would allow the BSP to keep policy rates unchanged for full year 2022 in order to see an acceptable growth pace well in place.
Meanwhile, FMIC remained bullish on growth prospects for the fourth quarter of 2021 as more firms reopened and consumers headed back to malls and restaurants.
This was driven by the greater easing of COVID-related restrictions and sharply decelerating cases in the past weeks. FMIC has also been banking on the expected heavy election spending since last year.
On manufacturing, FMIC said the continued rise should provide a good impetus to economic growth this new year.
It said national government spending should resume its rapid pace as it has built up substantial cash power to carry that out, especially, through infrastructure and capital outlays.
On the other hand, exports may climb at modest rates in 2022 while imports will only slide moderately, bringing higher trade deficit as the economy expands with less constraints.
The peso may linger in mild depreciation mode, given an expected stable dollar with an upside.
Source: https://www.philstar.com/business/2022/01/04/2151615/fmic-forecasts-average-inflation-44-last-year