Economists lower inflation forecast, survey shows

Private economists have lowered their inflation estimate for 2012, on grounds that the peso will likely appreciate, thus tempering the increase in consumer prices.

This is according to results of a survey conducted by the Bangko Sentral ng Pilipinas (BSP), which said that the inflation forecast of economists from the private sector was in step with government projections.

The results of the latest quarterly inflation survey conducted by the BSP in March showed that the new average inflation forecast of the private sector for 2012 is 3.5 percent, which is lower than the 4.2 percent projected in December.

The inflation projection for 2013 was unchanged at 4.1 percent.

“Based on the results of the BSP’s survey of private economists for March 2012, inflation is expected to be within the 3- to 5-percent target range for 2012 and 2013,” the BSP said in a report.

Reasons cited by the respondents for the lower inflation forecast for this year include the appreciation of the peso, which economists said is strengthening due partly to rising dollar inflows.

Dollar inflows come mainly from remittances from overseas Filipino workers, foreign portfolio investments, and foreign investments in the business process outsourcing sector.

A rise in the value of the peso makes imported goods cheaper in local currency terms, thereby tempering the rise in overall domestic prices.

The respondents also cited the probability that growth in demand for goods and services will be moderate because of the impact of the still sluggish global economy, which is being hampered by the ongoing debt crisis in the eurozone and anemic growth performance of the United States.

Respondents to the survey included economists from Banco de Oro, Bangkok Bank, Bank of America, Bank of China, Bank of Commerce, Chinabank, Deutsche Bank, Goldman Sachs, HSBC, Land Bank of the Philippine, Maybank, Metrobank, RCBC and UBS.

The BSP said a favorable inflation environment, which means moderate increases in the costs of raw materials for production, should eventually entice more foreign investors to do business in the Philippines.