By Lee C. Chipongian
Economists expect lower inflation of 2.9 percent for this year and 3.2 percent for 2020, according to the latest survey results of the Bangko Sentral ng Pilipinas (BSP).
Results of the second quarter or end-June Private Sector Economists’ Inflation Forecasts showed lower inflation compared to the mean inflation forecasts in the last survey (March 2019) which was 3.3 percent for 2019 and 3.4 percent for 2020. For 2021, the forecast was also lowered to 3.1 percent from 3.4 percent previously.
The private sector economists’ forecasts are higher than the Monetary Board-approved 2019 and 2020 inflation projections of 2.7 percent and 3 percent, respectively, that was announced last June 20, the day they decided to pause on its policy easing after adjusting key rates lower by 25 basis points last May 9.
BSP Governor Benjamin E. Diokno said last Friday that the results of the June survey showed lower inflation expectations for 2019 to 2021 as “analysts expected inflation to remain manageable and within the government’s target range (of two-four percent) over the policy horizon.”
Based on the survey, analysts continue to see manageable inflation and stable outlook with risks still broadly balanced.
The June survey, which included 27 respondents and conducted from June 7-17, also showed that upside risks to inflation include the adverse effect of weak El Niño weather conditions on domestic food supply, and the volatile global crude oil prices.
Other upside risks are higher domestic demand particularly in the fourth quarter because of the Christmas season, the weaker peso against the US dollar, higher government spending on infrastructure, and the potential impact of African swine fever on local pork prices.
Analysts also noted of possible downside risks such as continued implementation of non-monetary policy actions to increase domestic food supply and stabilize prices, such as the rice tariffication law, rice importations, and the mitigating measures put in place by the Department of Agriculture against El Niño; and easing global crude oil prices.
“Based on the probability distribution of the forecasts provided by 22 out of 27 respondents, there is a 94.6-percent probability that average inflation for 2019 will settle between the two-four percent range,” the BSP said.
For 2020, the survey said there is a 90.8-percent probability that inflation will continue to be within the two-four percent target band set by the government.