The inflation rate for November of 3.3 percent, which was higher than the Bangko Sentral ng Pilipinas’ (BSP) 2.4 percent to 3.2 percent forecast for the month, is a temporary uptick and would not affect the government’s two-four percent target, said BSP Governor Benjamin E. Diokno.
“The November inflation (of 3.3 percent) is transitory,” said Diokno. The average annual inflation will be within the government’s target range of two-four percent, he added.
The BSP also called the higher-than-expected inflation in September and October as transitory. It recently revised its 2020 inflation forecast to 2.4 percent, 2.7 percent for 2021 and 2.9 percent for 2022.
The latest inflation rate topped the peak of BSP’s forecast for the month because of higher food inflation such as vegetables, fish, fruits and meat. “Nonetheless, inflation is expected to settle within the government’s target range of three percent plus or minus one percent for 2020-2022 as the impact of supply disruptions due to recent typhoons is expected to be largely transitory,” said Diokno.
Downside risks to economic growth both globally and locally remains despite new developments in the COVID-19 vaccines, and mainly this is due to “logistical challenges in the distribution of the vaccine” which Diokno said “would have to be addressed before the recovery could resume.”
“In the near term, uncertainty remains high following the resurgence of the virus in the US, Europe and parts of Asia. The reimposition off lockdowns could further dampen economic recovery,” said Diokno.
The government, after Thursday’s meeting of the inter-agency Development Budget Coordination Committee (DBCC), revised the average inflation rate projection higher to 2.4 percent to 2.6 percent from its previous 1.75 percent to 2.75 percent it announced last August. The 2021 and 2022 inflation assumption remains at two-four percent.
The DBCC also adjusted the price assumption of Dubai crude oil for 2020 to $40 to $42 per barrel versus an earlier assumption of $35 to $45, while for next year and in 2022, it is still $35 to $50.
The peso-US dollar exchange rate assumption was also revised to P48 to P50 for 2020 compared to its August assumption of P50 to P52. For 2021 and 2022, it is a range of P48 to P53 versus previous assumption of P50 to P54.
The Philippines suffered damages due to typhoon Ulysses (Vamco) which devastated Cagayan Valley, Bicol, MIMAROPA, Laguna, Batangas and Metro Manila, specifically Marikina and Pasig, last November 12. About one million households or families were affected by the typhoon which brought Ondoy-level flooding.
The BSP’s Monetary Board, factoring in the bad weather conditions, cut the policy rate by 25 basis points last week, which a surprised policy action. Since February, the BSP reduced the policy rate by two percent.