Private sector economists watching the Philippines expect headline inflation to average 4.6% in 2022, above the Bangko Sentral ng target range of 2-4% manageable price increases. Pilipinas (BSP).
The latest BSP survey of bank and financial institution economists in May showed a higher-than-average average inflation rate projection of 4.1 percent in April, according to the central bank’s monetary policy report. for May 2022 published last week.
This latest round of PASB surveys of private sector economists was held May 12-17, with 16 respondents.
The BSP itself last week raised its inflation forecast for 2022 to a similar 4.6% from 4.3% previously.
“Analysts expect inflation to rise above the upper end of the government’s target range in 2022, with risks to the inflation outlook tilted to the upside largely due to the negative impact of the ongoing Russian-Ukrainian conflict over global oil and food prices, which are already at high levels,” the PASB said.
“Meanwhile, inflation is expected to stabilize near the upper target limit in 2023 before decelerating in 2024,” the BSP added. Economists predict higher inflation rates for next year – 3.6%, up from 3.4% previously – and 2024 (up slightly to 3.4% from 3.3%).
The BSP’s latest projection was an average 3.9% year-on-year increase in commodity prices in 2023.
“Most analysts expected the BSP to start tightening its policy in the second quarter of 2022 and increase the RRP [overnight reverse repurchase] rates within a range of 25 to 150 basis points (bps) from 2022 to 2024,” the BSP report said.
For the first time since November 2018, the BSP Monetary Council last Thursday raised the RRP or key rate – at which the BSP lends to banks – by 25 basis points to 2.25%, against the record level of 2% previously maintained. amid the protracted COVID-19 pandemic to support economic recovery.
Citing its May survey of private sector economists, the BSP said that “upside risks to inflation include: supply chain disruptions largely resulting from geopolitical tensions between Russia and the Ukraine, further exacerbated by the reimposition of containment measures in China and weather disruptions; high pressures on world oil and food prices caused by the ongoing Russian-Ukrainian conflict, which could lead to the continued emergence of second-round effects such as higher energy prices, transportation and wage increases; an increase in domestic demand due to the continued reopening of the economy given the eased mobility restrictions; and the weakening of the peso against the US dollar due to threats of deterioration in the Philippine economy and a possible withdrawal of investments.
“A few analysts have identified the emergence of the new variant of COVID-19 and the possible resurgence of COVID-19 cases as the main downside risk to the inflation outlook. The continued implementation of government subsidies (such as the fuel subsidy program and the Livestock Development and Competitiveness Bill) and other non-monetary government interventions, such as lower import duties on pork and rice, could help ease inflationary pressures,” the BSP said.
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