Stable inflation seen until 2015

Private sector economists polled by the Bangko Sentral ng Pilipinas shared the same view as the BSP’s that the country would continue to enjoy modest and within-target inflation until 2015.

Results of the survey, which the BSP conducted among economists of various private financial institutions in March, showed that their mean projection for inflation stood at 3.5 percent for this year, 3.8 percent for 2014 and 3.7 percent for 2015.

The latest forecasts were slightly more favorable than those recorded in the central bank’s previous quarterly survey, which showed that the inflation rates for 2013, 2014 and 2015 would likely average at 3.6 percent, 3.9 percent and 3.8 percent.

Under the government’s official targets, inflation should settle within the range of 3 to 5 percent this year and next and within the band of 2 to 4 percent in 2015.

According to the BSP, rising government spending and the infrastructure development program were likely to put pressure on overall consumer prices, but the impact would likely be eased by a strengthening of the peso.

“Analysts noted upside risk factors but the continued appreciation of the peso was seen to temper the effects of imported inflation,” the BSP said in its latest inflation report.

Last year, the peso was cited as one of the fastest-rising currencies against the US dollar. It appreciated throughout 2012 by nearly 7 percent to end the year at 41.05:$1. Since the start of 2013, the peso has been moving in the 40- and 41-to-a-dollar levels.

Some economists believed there was scope for the peso to appreciate some more, especially following the country’s attainment of investment grades.

The investment ratings, which were given by Fitch Ratings and Standard & Poor’s on March 27 and May 2, respectively, could trigger the inflow of more foreign investments in peso-denominated stocks and bonds.

There are views, however, that efforts of the BSP to temper the excessive volatility of the exchange rate could prevent a significant appreciation of the peso this year.