BSP may cut inflation forecast for this year

Inflation forecasts for the next 24 months may have to be revised downward following delays and the possible prohibition of power rate increases in Metro Manila amid speculation of collusion among energy producers.

The Bangko Sentral ng Pilipinas (BSP) currently sees inflation for this year clocking in at an average 4.5 percent, or faster than last year’s 3 percent. Next year, inflation is expected to ease to 3.2 percent.

But BSP Deputy Governor Diwa C. Guinigundo said these forecasts might be up for significant revisions due to delays in the implementation of higher power rates by the metropolis’ power concessionaire, Manila Electric Co. (Meralco).

“Those (forecasts) will have to change,” Guinigundo told reporters on Monday. “Those rate hikes were already included in our forecasts. That will change the forecast for 2014 and will carry over to 2015 due to base effects.”

The longer the power rate adjustments are delayed, the less these will affect average consumer prices for 2014. At the same time, lower inflation in 2014 may result in a higher average for 2015 because of base effects.

Last December, Meralco said it would have to increase its power rates by P4.15 a kiloWatt-hour after it was forced to buy more electricity from the Wholesale Electricity Spot Market (WESM) and liquid fuel-powered plants.

This followed the maintenance shutdown of the Malampaya natural gas facility. The situation was aggravated by the temporary shutdown of smaller plants, it was later discovered.

The Supreme Court has issued a temporary injunction to stop the power rate increases following lawsuits by several groups, including party-list Bagong Alyansang Makayaban (Bayan), which accused power companies of profiteering.