Inflation spike seen in December
Economists expect inflation to have peaked in December on the back of a slew of factors, including a weaker peso and higher fuel prices.
Economists polled by the Inquirer agreed the December consumer price index could be higher than the 2.5-percent year-on-year rise in November, which was almost a two-year high, and the 1.5 percent posted in December 2015.
The government will release December inflation data today, Thursday.
“Our estimate looks at a possible 2.7-percent inflation for December,” Ateneo de Manila University economics professor Alvin P. Ang said, citing increases in the prices of electricity and oil last month, on top of strong consumer demand during the holidays.
Ang said he expected the full-year inflation rate to have settled at 1.8 percent, the same as the Bangko Sentral ng Pilipinas’ forecast and still below the government’s 2-4 percent target range for 2016. Headline inflation averaged 1.7 percent in January through November of last year.
Rajiv Biswas, Asia-Pacific chief economist at IHS Markit, shared the same forecast as Ang’s due to “the impact of rising oil prices, higher electricity prices as well as the effect of recent peso depreciation on import prices.”
For Biswas, 2016 inflation settling below the lower end of the government’s program was “expected to keep the BSP on hold in early 2017 as inflationary pressures still remain within their inflation target range.”
Standard Chartered Bank economist for Asia Chidu Narayanan said he expected December inflation at 2.6 percent.
Land Bank of the Philippines market economist Guian Angelo S. Dumalagan’s projection was 2.8 percent, as he also cited upward pressures primarily because of the peso’s depreciation and increasing petroleum costs.
“A weaker peso makes dollar-denominated goods and services more expensive in peso terms. In fact, this is the reason why the generation charge component of Meralco’s electricity rate surged last month. Regarding oil prices, they have increased by more than 20 percent year-on-year in December due to the output cut agreement among Opec [Organization of the Petroleum Exporting Countries] and non-Opec producers. This uptick represents a recovery from November’s slight annual decline in global crude costs,” Dumalagan said.
“Moreover, inflation might have picked up last month due to increased consumer demand during the Christmas season,” Dumalagan added.
