MANILA – Fitch Solutions is keeping its 4-percent average inflation forecast for the Philippines this 2021 amid the cut in the central bank’s projection but sees average inflation next year to decelerate to around 3.4 percent.
In a report dated May 12, the unit of Fitch Group said these projections are above the midpoint of the government’s 2-4 percent target band until 2023.
On Wednesday, the Bangko Sentral ng Pilipinas’ (BSP) policy-making Monetary Board (MB) slashed the central bank’s 2021 average inflation forecast to 3.9 percent from 4.2 percent but hiked the 2022 projection to 3 percent from 2.8 percent.
The cut in this year’s inflation projection factored in the impact of a lower tariff on pork importation while the reason behind the change in next year’s inflation projection is the rise in global oil prices.
Domestic inflation is still elevated due to supply constraints on pork meat because of the African swine fever, among others, and the rise in global oil prices.
It decelerated to 4.5 percent in March and remained steady in the following month.
Inflation breached the government’s target band since last January and registered its highest so far this year last February at 4.7 percent.
Average inflation in the first four months this year stood at 4.5 percent.
Fitch Solutions projects the decline in demand-side pressures in the coming months that is expected to result in the abatement of food price pressures.
But as the global economy reopens, demand is seen to rise thus, the expectations for the continued elevated inflation rate, it said.
“That said, if the Philippines is still struggling to contain Covid-19 (coronavirus disease 2019) outbreaks in 2022, the recovery in domestic demand may take longer and rising demand-side pressures may not materialize,” it added. (PNA)
