MANILA, Philippines—The pace of price increases for basic goods and services will likely return to the government’s original target range by yearend as food prices normalize due to improved market supply, according to the head of the Bangko Sentral ng Pilipinas (BSP).
Speaking at an online forum of the Economic Journalists’ Association of the Philippines, BSP Governor Benjamin Diokno said the inflation rate, which jumped past economic managers’ 2 to 4 percent forecast for 2021, will slow down to an average 3.9 percent for the entire year.
Diokno said inflation will be tamed by “lower price pressures on food commodities” as a result of three factors:
- Improved weather
- Enforcement of Executive Order Nos. 128 and 133 on food imports
- Non-monetary interventions to boost supply
The two executive orders are Palace directives lowering tariffs on imported pork which, in turn, was expected to translate to lower prices for consumers who have had to pay substantially more since the outbreak of African swine fever in late 2019.
The BSP chief said he also expected inflation rate in 2022 to fall within the government’s official target range—an average of 3 percent for all of 2022.
Diokno described risks to the country’s inflation outlook as “broadly balanced”, but noted that the timely implementation of non-monetary measures could further ease the supply noose.
“In any event, analysts expect inflation to remain elevated in 2021 but to fall within the government’s 2 to 4 percent target range in 2022,” he said. “For this year, analysts expect that risks to the inflation outlook will remain tilted to the upside due to supply disruptions and rising global oil prices.”
The BSP chief said the inflation environment remains manageable despite recent numbers that showed a spike to 4.7 percent in February, before settling at 4.5 percent for March, April and May.
“The latest number is consistent with the BSP’s assessment that the uptick in inflation in the first half of 2021 is transitory,” Diokno said, adding that weather-related disturbances, higher global oil prices and positive base effects are also contributing to inflation.
Diokno also noted an improvement in the overall sentiment of the business sector.
According to the latest business expectations survey, business confidence for the first quarter of 2021 improved, rising to 17.4 percent from 10.6 percent in the fourth quarter of 2020.
Business outlook on the economy is more optimistic for the next quarter at 42.8 percent and for the next 12 months, at 60.5 percent, both higher than previous quarter’s survey results.
“The survey on consumer confidence in the fourth quarter of 2020 indicates that consumer confidence for the first quarter of 2021 likewise improved to 4.3 percent from -4.1 percent in the previous survey,” he said. “For the next 12 months, consumer sentiment remains optimistic.”