BSP raises inflation projections

In a briefing, BSP Assistant Governor Francisco G. Dakila Jr. said this year’s forecast was revised upwards to 5.2 percent from earlier projections of only 4.9 percent, while in 2019 inflation is seen to go up to 4.3 percent from 3.7 percent, as earlier predicted. (File Photo: Bangko Sentral ng Pilipinas/Facebook)

MANILA — Philippine monetary officials on Thursday raised the Bangko Sentral ng Pilipinas’ (BSP) average inflation projections for 2018 and 2019 due to the higher-than-expected outturn last August, continued supply-side factors, and the rise of oil prices in the international market.

In a briefing, BSP Assistant Governor Francisco G. Dakila Jr. said this year’s forecast was revised upwards to 5.2 percent from earlier projections of only 4.9 percent, while in 2019 inflation is seen to go up to 4.3 percent from 3.7 percent, as earlier predicted.

The continued increase in the price of rice, along with the impact of Typhoon Ompong on agricultural products, added to the upward adjustments in inflation forecasts, he explained.

On the other hand, the projection for 2020 is kept at 3.2 percent.

Dakila said inflation is projected to return to within the 2 percent to 4 percent target band in 2019 if the proposed rice tariffication is approved and signed into law and implemented next year.

He said rice tariffication is estimated to bring down inflation by about 0.7 percent.

He added that the impact of the typhoon on the prices of agricultural products is expected to linger for “just a few months.” Thus, inflation is still seen to peak in the third quarter of this year, he added.

Last August, the rate of price increases shot up to a multi-year high of 6.4 percent from month-ago’s 5.7 percent due to supply-side factors. To date, average inflation stands at 4.8 percent.

In terms of the impact of inflation on domestic growth, Dakila said they forecast growth numbers to be “maintained from the second quarter.”

“Once the infrastructure program of the government kicks into place, that can also provide further impetus for growth,” he said.

Growth, as measured by the gross domestic product (GDP), slowed to 6 percent in the second quarter of 2018 from 6.6 percent in the previous quarter.

This is slower than the government’s 7 percent to 8 percent target for the year until 2022 but BSP Deputy Governor Maria Almasara Cyd N. Tuano-Amador, during the same briefing, said this growth level remains “respectable.”

She explained that the hikes in the BSP rates, which increased by a total of 150 basis points on Thursday, were made to anchor inflation expectations.

“A healthy growth of the economy is still viable even with this policy rate hike because the issue is really one of stabilization and anchoring or having inflation expectations well-cemented,” Amador said.

“And if they are well-cemented, then you are able to create an environment that his conducive for stronger consumption, stronger investment and other aggregate demand considerations,” she added.