DBM expects inflation to fall within target in Q2

By Chino S. Leyco

The Department of Budget and Management (DBM) expects the rate of increase in consumer prices to settle within the government’s target in the second quarter of the year.

Budget Secretary Benjamin Diokno (KEVIN ESPIRITU / MANILA BULLETIN) Budget Secretary Benjamin Diokno (KEVIN ESPIRITU / MANILA BULLETIN)

Budget Secretary Benjamin E. Diokno said yesterday that inflation may fall within the 2.0 percent to 4.0 percent range during the April to June period and could further decelerate to the lower end of the government’s target in the second-semester.

“It’s tapering off,” Diokno told reporters, referring to the 4.4 percent inflation seen in last month.

The January inflation was the third straight month that the rate rose at a much slower pace and the first time it went below the 5.0 percent level since May last year. It was also below the market expectations of 4.5 percent.

“In fact there are scenarios where we’ll see inflation around two percent in the third or fourth quarter,” Diokno said.

The headline inflation has been decelerating after peaking at 6.7 percent in September to October last year.

Last week, the Bangko Sentral ng Pilipinas (BSP) said it expects inflation to settle “below 4.0 percent in March this year” and is forecasted to average at 3.07 percent in 2018.

The latest BSP inflation forecast was a downward revision from an earlier estimate of 3.18 percent set during the December 13, 2018 meeting.

For 2020, the central bank's forecast is now at 2.98 percent from 3.04 percent last December.

The central bank’s monetary board had kept its key policy rates steady last week, in apparent expectation of a more manageable inflation environment.

According to the Philippine Statistics Authority (PSA), the slower January inflation was mainly attributable to softer increments in heavily-weighted food and non-alcoholic beverages as well as transport.

BSP Assistant Governor Francisco Dakila earlier said that “latest inflation outlook continues to point towards decelerating and within target inflation over the policy horizon.”

He explained that the decline in the forecast was primarily due to the drop in Dubai crude oil prices.

The BSP earlier expected that Dubai crude oil this year would be around $69.41 per barrel but is now down to US$61.31 per barrel.

The lower inflation projection was also due to net base effect after the surge of rate of price increases last year on account of supply constraints that pushed prices up and the higher oil prices due to the external factors and excise tax hikes.