Inflation seen elevating in H1 2021

MANILA – The inflation rate is expected to remain elevated in the first half of the year, breaching the 5-percent level as early as this month, BDO Unibank Inc. first vice president and chief strategist Jonathan Ravelas said.

In an online forum of the Italian Chamber of Commerce in the Philippines on Tuesday, Ravelas said the inflation during this period is driven by the restriction in mobility due to quarantine measures.

He said production costs will be much higher as transportation mobility has not been restored.

The higher oil prices and transitory impacts of the typhoon during the fourth quarter of 2020 on food prices will also generate the typical rise in the inflation rate, Ravelas added.

He said the peak of inflation is projected in June.

However, Ravelas said if the peak of inflation would not be seen by mid-2021, it would remain elevated until October this year.

In February, inflation reached its 26-month high of 4.7 percent.

Ravelas said consumers are also expected to spend less and spend their money “very carefully” amid the rising prices of goods and services and the risk of potential job loss if the lockdown measures will be prolonged.

“I think the key strategy is trying to live with the virus,” he said.

He added the vaccines against Covid-19 will boost the confidence of the public to go out hence, encouraging businesses to remain open.

“In the meantime, we can normalize our lives if we normalize our practices. Establish protocols in ourselves to avoid getting Covid-19 and ensure that you sanitize all the time and avoid certain things like eating together with friends and also maintaining physical distancing,” Ravelas said.