ING Bank Manila senior economist Nicholas Mapa (left) and BPI lead economist Jun Neri
MANILA -- Several economists remain confident of within-target inflation rate for the Philippines this 2020 despite the higher-than-expected uptick in the January figure of 2.9 percent from last December’s 2.5 percent.
Last month’s inflation rate is still at the lower half of the government’s 2-4 percent target until 2021.
ING Bank Manila senior economist Nicholas Mapa said the faster rate of price increases in the first month this year is “a given” due partly to the impact on food supply of the two typhoons in the latter part of December and the eruption of Taal Volcano in early January.
He said food inflation, which accounts for bulk of the consumer price index (CPI) basket, rose to 2.9 percent last month from the previous month’s 2.5 percent.
Another driver of inflation rate last month is the higher excise taxes on alcoholic beverages and fuel.
Mapa expects inflation this year to “bounce then settle”, citing the low base last year.
“For the full year, ING still expects inflation to remain within target and average 3.2 percent but peaking in 3Q (third quarter),” he added.
In a report, BPI lead economist Jun Neri said that aside from the higher excise taxes, what pushed domestic oil prices up is the 11.6-percent year-on-year uptick of the West Texas Intermediate (WTI) price, which ranged between USD51-63 per barrel last month.
Oil prices in the international market has declined due to concerns on the novel coronavirus (2019-nCoV), but Neri projects that if the health crisis is resolved in the first quarter this year, oil prices may rise in the coming months along with the recovery in China.
In terms of rice, a staple food in the country, Neri said favorable base effects are still being felt vis-à-vis the tariffication law for this produce that started last year.
He, however, forecast the base effect to disappear next quarter while rice prices start normalizing.
“An upside risk to this is the drought in Thailand and Vietnam, which could lead to higher rice prices in the coming months,” he added.
Despite the expected faster inflation rate in the coming months, Neri discounts the full-year figure breaching the government’s target band this year, with the average seen at 3.4 percent.
Also, ANZ Research considers it “remote” for inflation to rise beyond the government’s target range despite its sustained rise since hitting a low of 0.8 percent in October last year. (PNA)
