Inflation seen at low end of 3-5% target

MANILA, Philippines - The private sector is expecting inflation to remain within the low end of the central bank’s three- to five-percent target range this year and next, a Bangko Sentral ng Pilipinas (BSP) survey showed.

Consumer prices, which rose 3.2 percent last year, could accelerate 3.6 percent in 2013 and 3.9 percent in 2014, economists from 18 private banks polled by the BSP said.

The forecasts were slower compared to their September assessments of 3.9 percent and four percent for this year and next, respectively. These, however, remain above the central bank’s own outlook of three percent and 3.2 percent.

Inflation slightly accelerated to three percent in January from 2.9 percent in December.

“Analysts attributed their downward adjustment of inflation forecasts partly to the continued appreciation of the peso, which is expected to temper the effects of imported inflation arising from geopolitical tensions in the Middle East,” BSP said in its inflation report for the fourth quarter of 2012.

The peso was Asia’s second best performer last year after appreciating 6.8 percent against the dollar. It has strengthened roughly one percent ever since, closing at 40.675 to a dollar on Friday.

A strong peso makes imports more affordable, thus, lowering prices of goods when sold here. It also gives more purchasing power to consumers, allowing them to buy more by spending less.

Zeno Ronald Abenoja, director of the BSP’s Department of Economic Research, said inflation pressures are “broadly balanced.”

Downside pressures, he said, will persist from continued weakness of global economy and peso’s strength, but added risks from impending power rate hikes could are also present.

In its report, BSP noted lower power prices in the last three months of the year, averaging P5.53 per kilowatt-hour, down from P6.19 in the third quarter.

Pump prices declined by P1.50 per liter, P1.65 per liter and P3.35 per liter for gasoline, kerosene and diesel, respectively, from October to December, BSP said.

The average price of cooking gas, on the other hand, inched up P0.69 per liter.

 Food prices, meanwhile, rose 2.2 percent in the fourth quarter, slower than three percent in the third quarter.

“We are comfortable we can hit the targets this year and next year,” Abenoja said.