Malaysian financial giant Maybank expects inflation in the Philippines to inch up to 2.8 percent this year as green shoots of recovery in the global economy would likely push oil prices higher.
“We continue to expect the recent surge in headline inflation due to the natural disasters and African swine fever outbreak to be temporary,” Maybank Kim Eng analysts Suhaimi Ilias, Zamros Dzulkafli, Ramesh Lankanathan and William Poh Chee Keong said in a report last week.
To recall, headline inflation climbed to a 22-month high of 3.5 percent year-on-year in December last year partly due to the spillover effect on food prices of the string of strong typhoons that battered the country in the fourth quarter.
As such, the rate of increase in prices of basic commodities averaged 2.6 in 2020, a little higher than the 2.5 percent recorded in 2019.
“Nevertheless, we see upside risk to the forecast on a possible bigger rise in global crude oil prices as Opec countries adjusted their production and further upsurge in domestic food costs this year,” Maybank said, referring to the Organization of the Petroleum Exporting Countries.
Maybank noted that the Bangko Sentral ng Pilipinas (BSP) itself had jacked up its 2021 inflation projection to 3.2 percent from 2.7 percent previously owing to expectations of faster food and global price hikes.
While the inflation rate was expected to be higher but still within the government’s 2-4 percent target range this year, Maybank sees the BSP keeping the policy rate steady at a record low of 2 percent throughout 2021 after the cumulative 200-basis point cut in interest rates last year amid a pandemic-induced recession.
Maybank also pointed to the “current sizable negative real interest rate and expected recovery in 2021” among the reasons why it expected the BSP to keep monetary policy as is until the end of this year. INQ