Inflation likely picked up in Feb on high oil costs
Inflation—or the year-on-year increase in consumer prices—likely picked up in February due to expensive oil, which would also be aggravated by the armed conflict at the Ukrainian-Russian border.
Of the 16 headline inflation forecasts collected by the Inquirer last week, 14 banks and think tanks expected the rate of increase in prices of basic commodities to be faster than the 14-month-low 3 percent recorded in January. All projections were within the Bangko Sentral ng Pilipinas’ (BSP) 2 to 4 percent target band of price hikes deemed manageable and conducive to economic growth. The government’s February consumer price index (CPI) report will be out on March 4.
University of Asia and the Pacific’s (UA&P) Victor Abola had the highest forecast of 3.8 percent year-on-year, which he mainly attributed to higher fuel and LPG prices this month. Abola said that even before the BSP jacked up its 2022 annual inflation forecast to 3.7 percent, he already had the same projection, taking into account elevated crude oil prices. “It may have an upward revision if crude oil prices do not go below $85 per barrel,” he said.
Food prices
Bank of the Philippine Islands’ Emilio Neri Jr. and Oxford Economics’ Makoto Tsuchiya both estimated February inflation at 3.6 percent.
“We expect some spillover effects on food prices from Typhoon ‘Odette’ last year, as well as continued pressures on pork prices from the African swine fever (ASF),” Tsuchiya said.
Moving to next month, Neri said that “further acceleration of energy, wheat, fertilizer prices are expected this March, maybe even enough to lead to a breach of the inflation target for the second year in a row.” Neri was referring to last year’s above-target inflation episode due to expensive food, especially pork, due to the prolonged ASF crisis. Escalating tensions between Ukraine and Russia were also seen spilling over to global food prices on higher international oil costs plus trade disruptions.
UnionBank’s Ruben Carlo Asuncion projected a 3.4-percent inflation rate in February, while Barclays’ Shreya Sodhani, DBS’s Han Teng Chua and Security Bank’s Robert Dan Roces forecasted 3.3 percent year-on-year.
Risks
Five economists expect a 3.2-percent February headline inflation, namely: BDO Unibank’s Jonathan Ravelas, ING’s Nicholas Antonio Mapa, Moody’s Analytics’ Sonia Zhu, Rizal Commercial Banking Corp.’s Michael Ricafort, and United Overseas Bank’s Loke Siew Ting.
Capital Economics’ Gareth Leather and Philippine National Bank’s Alvin Joseph Arogo forecasted 3.1 percent.
On the other hand, Deutsche Bank’s Michael Spencer and Goldman Sachs Economics Research expect the February rate to match January’s 3 percent.
“The Ukraine crisis, by pushing crude oil prices higher, poses a risk to inflation in the months ahead. We estimate that a sustained 10-percent rise in crude oil prices adds about 0.3 percentage point to CPI-inflation in the Philippines through the increase in petrol and gas prices,” Spencer said.
While Goldman Sachs’ year-on-year forecast was similar to the January rate, the investment banking giant said that on a seasonally adjusted basis, February price levels were 0.4-percent higher than the previous month’s “mainly due to higher domestic fuel prices with a partial offset from lower vegetable prices.”
In a separate Feb. 25 report, Goldman Sachs hiked its 2022 inflation forecast for the Philippines to 4 percent—the top end of the target range—from 3.2 percent previously. INQ
