March inflation seen at 28-month high of 3.6%

Inflation likely hit a 28-month high of 3.6 percent in March, the Department of Finance said yesterday, blaming a weaker peso that jacked up food and oil prices as well as power rates.

“Higher inflation is due primarily to base effects as petroleum prices are normalizing from low levels set last year,” Finance Undersecretary and chief economist Gil S. Beltran said in an April 3 report to Finance Secretary Carlos Dominguez III.

The government will announce the March inflation figure today.

Most economists polled by the Inquirer last week also expected the rate of increase in prices of basic goods to have had exceeded February’s 3.3 percent, although lower than the 3.7 percent recorded in November 2014.

“Our inflation forecast for March is at 3.5 percent on the back of higher prices of food items and domestic petroleum products,” Metrobank research analyst Pauline May Ann E. Revillas said.

University of Asia and the Pacific economics professor Victor A. Abola shared the same projection of 3.5 percent as “milder food and fuel prices offset higher electricity rates.”

Rajiv Biswas, Asia-Pacific chief economist at IHS Markit, said his similar 3.5-percent headline inflation forecast was “due to increases in power tariffs and the transmission effects of the peso depreciation and rising input costs into retail consumer prices.”

The peso has weakened to the 50:$1 level since mid-February.

“However, world oil prices edged lower during March, resulting in some decline in retail petrol prices, which mitigates upward inflationary pressures,” Biswas added.

Standard Chartered Bank economist for Asia Chidu Narayanan’s projection was also 3.5 percent year-on-year.

For ANZ Research economist for South and Southeast Asia Eugenia F. Victorino, strong domestic demand should see headline inflation on an upward path reaching 3.4 percent in March.

“While transport prices are still contributing positively to the annual gains in CPI (consumer price index), its effect is fading. Gasoline and diesel prices have been contracting on a monthly basis. Meanwhile, electricity prices of the biggest distributor rose for the second straight month,” Victorino noted.

Land Bank of the Philippines market economist Guian Angelo S. Dumalagan also expected consumer prices to have increased by 3.4 percent in March as the continued depreciation of the peso potentially offset the slower annual rise in oil prices.

Ateneo de Manila University economics professor Alvin P. Ang’s forecast was also 3.4 percent. “BSP (Bangko Sentral ng Pilipinas) estimates are in line with our expectations that it will not breach 4 percent this year. It is possible at current oil price ranges and agriculture expected to rebound this year that this is the peak. We may see deceleration from April,” Ang said.

The March inflation forecasts of London-based economic research firm Capital Economics and DBS Bank Ltd. economist Gundy Cahyadi were a lower 3.1 percent. —BEN O. DE VERA