Inflation seen easing to about 3% this year

MANILA, Philippines - Inflation could average around three percent this year, lower than the 4.1 percent average in 2014, the research arm of Metropolitan Bank and Trust Company said.

The bank has slashed its forecast for the average inflation this year to three percent from 3.7 percent following lower global commodity prices and the declining cost of oil in international markets.

“Expect global commodity prices to remain soft for most of 2015, given muted global economic growth prospects and the strong dollar,” Mabellene Reynaldo, research analyst at Metrobank, said in a report.

 “The global oil market also remains well supplied, although sudden spikes cannot be discounted if geopolitical tensions escalate once again,” Reynaldo said.

Inflation eased to 2.7 percent in December from 3.7 percent in November due to the continued drop in oil prices and the lower cost in a number of food items.

This brought the 2014 average of inflation to 4.1 percent, well-within the Bangko Sentral ng Pilipinas’ three to five percent range. This is the sixth consecutive inflation settled within the target range set by the central bank.

For this year, the BSP has forecast inflation to remain manageable and average three percent, which is also well-within the two to four percent goal.

“The 2014 global commodity price index ended on a softer note as energy prices continue to contract in December,” Reynaldo recounted.

The energy index, she said, decreased to 7.2 percent year-on-year, while the food and metals indices went down to an annual 3.4 percent and 6.6 percent, respectively.

“Global oil prices were on a steady climb approaching the middle of 2014, brought by improving global growth prospects and supply concerns from geopolitical tension in oil-producing countries,” Reynaldo said.

 “However, a sharp reversal occurred in the second half with high US supply, soft demand, and OPEC’s (Organization of the Petroleum Exporting Countries) decision to maintain targets despite tumbling prices,” Reynaldo continued.

At the same time, the analyst pointed out food prices, which rose initially in 2014 amid uncertainties in Ukraine and drought in the US eased toward the middle of the year on adequate supply.

“Metals were mostly steady for the year and ended lower as well, dragged by precious metals. Gold slipped by 10.3 percent year on year in 2014 as the improving US economy supported stocks and the dollar,” Reynaldo said.