BSP: Private-sector economists see 4.6% inflation in 2022

Bangko Sentral ng Pilipinas (File photo / Philippine Daily Inquirer)

Private-sector economists watching the Philippines expect headline inflation to average 4.6 percent in 2022, above the Bangko Sentral ng Pilipinas’ (BSP) 2 to 4 percent target band of manageable price hikes.

The BSP’s latest survey among banks and financial institutions’ economists in May showed a higher mean inflation rate projection than the 4.1-percent average on April, according to the central bank’s Monetary Policy Report for May 2022 released last week.

This latest round of the BSP’s survey of private-sector economists was held on May 12 to May 17, with 16 respondents.

The BSP itself last week jacked up its 2022 inflation forecast to a similar 4.6 percent, from 4.3 percent previously.

“Analysts expect inflation to breach the upper end of the government’s target range in 2022, with risks to the inflation outlook tilted to the upside largely driven by the adverse impact of the ongoing Russia-Ukraine conflict on global oil and food prices, which are already at elevated levels,” the BSP said.

“Meanwhile, inflation is expected to settle close to the upper end of the target in 2023 before decelerating in 2024,” the BSP added. Economists forecast higher inflation rates for next year—3.6 percent, from 3.4 percent previously—and 2024 (slightly up to 3.4 percent from 3.3 percent).

The BSP’s own latest projection was an average of 3.9-percent year-on-year increase in prices of basic commodities in 2023.

“Most of the analysts anticipated the BSP to begin its policy tightening in the second quarter of 2022 and increase the RRP [overnight reverse repurchase] rate by a range of 25-150 basis points (bps) in 2022 to 2024,” the BSP report said.

For the first time since November 2018, the BSP’s policy-making Monetary Board last Thursday hiked the RRP or policy rate — at which the BSP lends to banks — by 25 bps to 2.25 percent, from the record-low 2 percent earlier maintained amid the prolonged COVID-19 pandemic to support economic recovery.

Citing its May survey among private-sector economists, the BSP said that “the upside risks to inflation include: supply chain disruptions stemming largely from the geopolitical tensions between Russia and Ukraine, exacerbated further by the reimposition of lockdown measures in China and weather disturbances; elevated pressures on the global prices of oil and food commodities brought about by the ongoing Russia-Ukraine conflict, which could result in the continued emergence of second-round effects such as higher energy prices, transport costs, and wage hikes; an increase in domestic demand owing to the further re-opening of the economy given loose mobility restrictions; and the weakening of the peso against the US dollar due to threats of downgrade of the Philippine economy and possible withdrawal of investments.”

“A few analysts identified the emergence of the new COVID-19 variant and possible resurgence of COVID-19 cases as the main downside risk to the inflation outlook. The continued implementation of government subsidies (such as fuel subsidy program and livestock development and competitiveness bill) and other non-monetary government interventions, such as the lowering of import tariffs on pork and rice could help mitigate inflationary pressures,” the BSP said.