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Philippines: Inflation expected to accelerate further
MANILA, Philippines — Private sector economists further raised their inflation forecasts, with the rate expected to stay above the two to four percent target range of the Bangko Sentral ng Pilipinas (BSP) until next year as price pressures have become broad-based.
Dennis Lapid, officer-in-charge of the Department of Economic Research at the BSP, said the results of the central bank’s survey of private sector economists for November showed higher mean inflation forecast for 2022 at 5.9 percent from 5.7 percent in the October survey.
“Risks to the inflation outlook tilted to the upside due to lingering inflationary pressures brought on by weather disturbances, global supply chain disruptions, COVID-19 pandemic, weaker peso against the dollar, and second-round effects,” Lapid said.
Inflation averaged 5.4 percent from January to October , well above the BSP’s two to four percent target, after accelerating to a 14-year high of 7.7 percent in October from 6.9 percent in September.
For this year, Al-Amanah Islamic Bank has the higher inflation forecast at 8.4 percent followed by Korea Exchange Bank with eight percent and Mizuho Bank at six percent.
Several banks, including Security Bank, Rizal Commercial Banking Corp., Metropolitan Bank & Trust Co., GlobalSource Partners and East West Banking Corp. expect inflation to average 5.8 percent this year.
BSP Governor Felipe Medalla earlier said that inflation is not expected to breach eight percent in November or December.
“I’m willing to bet a lot that it will not exceed eight percent. It might, but even money, I will bet that it will not,” Medalla said.
Lapid said the mean inflation forecasts for 2023 and 2024 increased to 4.9 percent from 4.6 percent and four percent from 3.8 percent, respectively.
“Meanwhile, inflation is expected to remain beyond the target range in 2023 and decelerate toward the upper end of the band in 2024,” Lapid said.
Al-Amanah Islamic Bank also has the highest inflation forecasts for 2023 and 2024 at eight percent.
Last Thursday, the Monetary Board also raised its inflation forecasts to 5.8 percent for 2022, 4.3 percent for 2023 and 3.1 percent for 2024.
According to Lapid, private sector economists said upside risks to inflation include high prices of selected food commodities and oil, the ongoing Black Sea conflict, COVID-related risks as well as the depreciation of the peso against the dollar.
Other inflationary pressures, he added, include the second-round effects, particularly higher transport fares and wages as well as the Christmas holiday spending.
On the other hand, Lapid said the downside risks to inflation are seen to emanate mainly from expectations of more policy rate hikes by the BSP, the recent recovery of the peso against the greenback as well as expectations of a global demand slowdown given an impending recession in the US and continued lockdowns in China.
Based on the probability distribution of the forecasts provided by 16 out of 22 respondents, analysts assigned a probability of 1.3 percent that average inflation for 2022 will settle within the two to four percent range and 97.5 percent that inflation will exceed four percent.
Meanwhile, the probability that inflation will fall within the target band in 2023 and 2024 declined to 12.5 percent from 28.9 percent and 63.6 percent from 68.9 percent, respectively.
Source: https://www.philstar.com/business/2022/11/21/2225220/inflation-expected-accelerate-further