MANILA – Bangko Sentral ng Pilipinas’ (BSP) policy-making Monetary Board (MB) on Thursday cut the average inflation forecast for 2019 and 2020, taking into account the further slowdown of inflation.
In a briefing, BSP Deputy Governor Francisco Dakila Jr. said the 2.7 percent forecast for this year, made during the MB’s rate setting meet last June, was slashed to 2.6 percent.
For 2020, the forecast was cut from three percent to 2.9 percent while the 2021 forecast was set at 2.9 percent.
Dakila said risks to inflation for this and next year are “evenly balanced” while it is “tilted on the downside” for 2021 due to global growth outlook.
“We see a continuing relaxation of constraints on food prices,” he said in explaining the reason for the cuts in the inflation projections, citing the impact of the Rice Tariffication Law.
The central bank official said expectations are for further deceleration of inflation in key commodity items in the coming months.
Also, the MB revised its projection for the international prices of crude oil for this year from USD64.56 per barrel to USD63.58 per barrel and the 2020 figure from USD61.35 per barrel to USD60.39 per barrel.
Relatively, Dakila said the cut in the Federal Reserve’s key rates is positive for the local currency relative to the US dollar, with the peso seen to remain stable.
Economic managers’ peso-USD dollar assumption for this year is a range between 51-53.
On the over-all expansion of the domestic economy, the central bank official said the six to seven percent target, as measured by gross domestic product (GDP), for this year “remains achievable” but at the lower end of the target.
Earlier in the day, the Philippine Statistics Authority (PSA) reported that second quarter growth further slowed to 5.5 percent from quarter-ago’s 5.6 percent and year-ago’s 6.2 percent. This brought first half GDP to 5.5 percent.
Dakila said they expect the recovery of the domestic economy in the second half of the year with the help of lower inflation rate, which in turn, is expected to boost domestic spending. (PNA)
