Expect the unexpected? Economists see Feb inflation at 5%

With headline inflation projected to have reached 5 percent year-on-year in February, economists believe a more relaxed importation, especially of pork, should immediately unburden Filipinos beset by high food prices in recent months.

Of the 16 economists who responded to the Inquirer’s poll, 14 believe that the inflation rate last month was already above the manageable 2-4 percent target band, which was supposed to give the country just enough room to sustain consumption and economic growth.

The Philippine Statistics Authority (SPA) will release the February data on Friday, March 5.

Ateneo de Manila University’s Alvin Ang had the highest forecast of 5.1 percent and warned that the rate of increase in prices of basic commodities “will most likely remain elevated, probably until the second or third quarter.”

In January, inflation hit a two-year high of 4.2 percent mainly as food prices surged. The last time headline inflation breached 5 percent was in 2018, when a combination of higher excise taxes on consumption, elevated global oil costs and rice supply constraints spilled over to consumer prices.

Ang nonetheless agreed with the economic managers who had said the current elevated inflation episode was only “transitory.”

“Importation can help, but it also will take time. This is a supply choke—if it is addressed faster and sooner, then [inflation] can possibly go back to the high end of the BSP [Bangko Sentral ng Pilipinas’] range,” Ang said.

ANZ’s Sanjay Mathur, Bank of the Philippine Islands’ Emilio Neri Jr., and Security Bank’s Robert Dan Roces projected a 5-percent inflation in February.

Deutsche Bank’s Michael Spencer, Philippine National Bank’s Alvin Arogo, Rizal Commercial Banking Corp.’s Michael Ricafort, and Sun Life Financial’s Patrick Ella shared the same forecast of 4.9 percent.

UnionBank’s Ruben Carlo Asuncion projected 4.8 percent, while the forecast of BDO Unibank’s Jonathan Ravelas, Nomura’s Euben Paracuelles, and University of Asia and the Pacific’s Victor Abola was 4.7 percent.

For HSBC’s Noelan Arbis, inflation rose 4.6 percent year-on-year last month; ING’s Nicholas Antonio Mapa estimated a lower 4.5 percent.

But two economists believed that inflation returned within target in February. Capital Economics’ Alex Holmes and Moody’s Analytics’ Steven Cochrane said the rate was likely only 3.8 percent year-on-year.

In a webinar last week, Cochrane said while headline inflation spiked in January, core inflation was “not so bad” as food and energy prices were driving the uptrend.

“If food inflation does not ease, imports of pork or other products can help in the near term until production can rise to meet demand,” he said.