By Lee C. Chipongian
Inflation rate will likely settle at 2.7 percent for 2019, higher than what the Bangko Sentral ng Pilipinas (BSP) estimated at 2.5 percent, mainly due to bad weather, higher pork prices and global oil prices volatility, according to the latest Private Sector Economists’ Inflation Forecasts report.
Economists and analysts polled by the BSP have lowered their 2019 mean inflation forecast from 2.9 percent (end-June survey) to 2.7 percent as of the end-September survey.
For 2020, private forecasters also moderated their mean inflation projection to 3.1 percent from 3.2 percent previously, but decided to keep its 3.1 percent forecast for 2021.
The BSP said analysts point to these key downside risks to inflation: Non-monetary policy actions to increase domestic food supply and stabilize prices, such as the rice tariffication law; base effects; and stable global crude oil prices and lower electricity.
Analysts also noted other downside risks such as the now lower prices of local rice and other food items and the weaker global economic growth prospects due to the ongoing and escalating US-China trade conflict.
The upside risks to inflation, in the meantime, include adverse effects of weather conditions on domestic food supply; and expectations of elevated pork prices due to the African swine fever and increased demand for other meat products such as chicken.
The central bank said private forecasters are also concerned about the potential rebound in global oil prices and the weaker peso against the US dollar, currently at the ₱51 level. Other risks to inflation will come from the higher domestic demand during the holiday season, the proposed adjustments in excise taxes on oil, tobacco, and alcoholic beverages, said the BSP. Geopolitical tensions are also upside risks to domestic prices.
The end-September BSP survey of private analysts included 26 respondents and the survey was conducted September 5 to 16.
Based on the results, the BSP said 22 of 26 respondents said there is a 90.4 percent probability that the average inflation for 2019 will settle between the two-four percent target band set by the government.
For next year, analysts think there is an 88.9 percent chance that the inflation average will keep within the two-four percent range as well.
BSP Deputy Governor Francisco G. Dakila Jr. said inflation is expected to start climbing in the first quarter of 2020 and not in the fourth quarter 2019 as earlier assessed, and this is due to base effects.