2017 inflation seen at 3.3%
Economists slightly lowered their inflation forecasts for this year and next year as the Bangko Sentral ng Pilipinas (BSP) believed that the rate of increase in the prices of basic goods had already peaked in March and April.
BSP Deputy Governor Diwa C. Guinigundo told reporters on Friday that headline inflation likely hit its highest year-on-year jump at 3.4 percent.
Guinigundo nonetheless said they were not discounting that inflation would likely reach 3.4 percent also in August.
In May, Guinigundo said the BSP expected inflation to peak at 3.7-3.8 percent by August, before easing toward the end of the year.
In its latest poll among private sector economists, a BSP report released also on Friday showed that the average inflation forecast for 2017 slightly declined to 3.3 percent during the June survey from 3.4 percent in March.
“Analysts attributed their lower 2017 inflation forecast to the following: slower rate of increase in global oil prices as increased production of shale oil in the US counteracted the supply cuts agreed upon by the Opec (Organization of the Petroleum Exporting Countries) members; lower electricity rates in June which reflected Meralco’s refund to customers; and lingering uncertainty over the prospects of the global economy,” the BSP said.
The key upside risks to inflation outlook, it said, were seen to emanate from the depreciation of the peso, the proposed tax reform, government spending on infrastructure, transport fare hike, base effects, adverse weather conditions in the latter part of 2017, another Fed rate hike in the second half of 2017, and US protectionism.
The government targets inflation to settle within the 2-4 percent range this year.
For 2018, 30 bank economists’ mean inflation forecast also declined to 3.4 percent from 3.5 percent a quarter ago.
However, the average forecast for 2019 inched up to 3.5 percent from 3.4 percent previously, the survey showed.
According to the report, “the latest baseline forecasts of the BSP show that inflation would likely settle near the midpoint of the government’s target range of 2-4 percent in 2017 to 2019.”
“Inflation is projected to peak in the third quarter of 2017, driven by positive base effects and the continued strength in domestic economic activity before reverting back to the midpoint of the target range in 2018-2019,” according to the report.
“The risks to future inflation remain tilted toward the upside. The impact of the government’s fiscal reform program and the pending petitions for adjustments in electricity rates are the main upside risks to inflation. Meanwhile, the uncertainty in the global economic landscape continues to be the main downside risk to inflation,” according to the BSP.
