Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said Wednesday that March inflation may have come down to 4.6 percent from 4.7 percent in February with government’s non-BSP actions and improved supply conditions.
The 4.6 percent is BSP’s point inflation projection while its forecast range is 4.2 percent to five percent for the month of March.
Diokno, citing the Department of Economic Research (DER), said the BSP projects March inflation to settle within the 4.2 percent to 5.0 percent range but could achieve the low end of the forecast following adjustments to lower Meralco electricity rates.
According to the DER, lower prices of key food items due to improved supply conditions and the continued implementation of price caps on meat products are the main sources of downside prices pressures in March.
“However, these factors could be partly offset by higher domestic oil prices and the depreciation of the peso,” it added.
As of March 25, the BSP’s last Monetary Board policy meeting, the inflation average rate forecast for 2021 is 4.2 percent, up from its previous estimate of four percent announced last February, while for 2022, it is 2.8 percent versus the previous 2.7 percent.
Diokno has said that the government’s non-monetary measures such as reducing import tariff on pork could pull the inflation forecast lower to below four percent this year.
He said the 4.2 percent average inflation forecast for this year is based on the assumption that “nothing will be done”. However he said the government will “do something” such as cutting the tariff on imported pork, as well as a “lot of administrative work” to address the shortage and therefore ease rising prices, among other things.
Diokno said the monetary policy settings continue to be appropriate to support the economic recovery this year since the transitory nature of the rising inflation mainly reflects the impact of weather-related disturbance on the supply of key food items, as well as higher global oil prices. Demand-side pressures, in the meantime, remain “largely subdued with core inflation showing relative stability,” he said.
Security Bank Corp. chief economist Robert Dan Roces said they expect March inflation to be higher at 4.8 percent. The bank’s own forecast range for the month is 4.7 percent to 5.1 percent.
Roces still noted that food prices such as meat and pork have remained steady because of the price ceiling and vegetable and fish prices have gone down. He also noted that oil prices have been reduced while Meralco had distribution rate true-up refunds and bringing down rates to its lowest since 2017.
For the full-year, Security Bank’s forecast is also more than BSP’s 4.2 percent, they expect five percent instead.
“We expect headline inflation to be elevated this year and average five percent, with the threat of forward inflationary pressures mostly emanating from commodity prices led by oil that could see a resurgence of upward movements should major economies reopen again; and this is on top of the low base effects from 2020,” said Roces.
“However, the reimposed ECQ in the Greater Manila Area as well as some localized curbs in major cities nationwide could cause slower price growth relative to the extent of the new lockdowns, thus our estimates have a downward bias. We maintain that core inflation will be a key determinant of consumption recovery, as the release of pent-up demand, should increase consumption if the curbs are lifted amidst a wider vaccine rollout that may improve consumer confidence,” he also said.