By LEE C. CHIPONGIAN
Economists revised their inflation projection lower this year to 2.9 percent – same as the central bank’s – from 3.1 percent previous estimate despite upside risks since they expect “manageable and within-target inflation over the policy horizon”, according to the latest Private Sector Economists’ Inflation Forecasts survey of the Bangko Sentral ng Pilipinas’ (BSP).
The December survey showed a mean inflation forecast for 2020 of 2.9 percent and a 3.1 percent forecast for 2021. The economists’ 2021 inflation estimate is however higher than the BSP’s 2.9 percent.
BSP Governor Benjamin E. Diokno said Friday that the “results of the BSP’s latest survey of private sector economists in December (2019) showed well-anchored inflation expectations for 2020-2021.”
The survey, which included 26 economists working in banks or financial institutions, showed that 21 of those surveyed think there is an 88.5 percent probability that the average inflation for 2020 will settle between the government’s two-four percent target range. For 2021, a within-target average inflation is probable with an 87 percent chance.
The BSP said analysts still expect manageable and within‐target inflation even as risks to the inflation outlook which remained broadly balanced in 2019 will have a more upside bias for this year.
“Analysts anticipate a benign inflation environment in 2020, with risks to the inflation outlook likely to be tilted to the upside due mainly to the implementation of other packages under the Comprehensive Tax Reform Program such as the excise taxes on oil and tobacco,” said the BSP.
Diokno noted that based on the BSP inflation outlook, the baseline projections continued to indicate that inflation will keep to the two-four percent target for the next two years.
“The balance of risks to the inflation outlook continues to lean slightly toward the upside in 2020 and toward the downside in 2021,” remarked Diokno during Friday’s fourth quarter inflation briefing.
“Upside risks to inflation over the near term emanate mainly from potential volatility in international oil prices amid geopolitical tensions in the Middle East as well as the potential impact of recent weather disturbances and natural hazards on domestic food prices. However, uncertainty over trade policies in major economies continue to weigh down on global economic activity, which could mitigate upward pressures on commodity prices,” he said.
In 2019, inflation rate averaged at 2.5 percent from 5.2 percent in 2018. Last year, there was lower food inflation as rice prices declined and the peso was also stronger while non-food inflation also decreased.