Gov’t raises inflation forecast to 4-4.5%

Economic managers on Monday conceded that inflation would likely breach the original 2-4 percent target for 2018 and had adopted the Bangko Sentral ng Pilipinas’ higher forecast of 4-4.5 percent for the entire year, even as they also expect oil and rice prices to stabilize toward yearend.

While keeping the 2-4 percent inflation target for 2018-2020, the Cabinet-level Development Budget Coordination Committee (DBCC) jacked up its projected rate of increase in prices of basic goods for this year from the forecast of 2-4 percent made during their previous meeting in April.

For 2019-2022, the yearly inflation forecasts were kept at 2-4 percent.

In a briefing, Budget Secretary Benjamin E. Diokno said the higher forecast for 2018 was “in recognition of what happened in the first five months of the year.”

From January to May, headline inflation averaged 4.1 percent, already above the full-year target range.

Most economists expect the inflation rate to hit a fresh over five-year high in June and exceed the 4.6 percent posted in May.

The economic team had blamed the elevated inflation in May to higher prices of fish and seafood, fuel and lubricants, as well as bread and cereals, including rice.

Diokno nonetheless said that they expected the rate of increase in consumer prices to taper off in the second half, as both global oil prices as well as local rice prices were seen stabilizing.

Meanwhile, the DBCC also cut to 9 percent the merchandise exports growth target for 2018 from 10 percent previously.

The imports’ goal was also reduced to a 10-percent increase from 11 percent.

Socioeconomic Planning Secretary Ernesto M. Pernia said the trade war between top trading nations such as the United States and China “may dampen a bit the global economic growth.”

As such, the trade war “could have adverse effects on our exports in the global market,” said Pernia, who heads the state planning agency National Economic and Development Authority.