Private economists project lower inflation

MANILA, Philippines - Economists of private banks see lower inflation over the next two years as declining global oil prices and lower domestic utility rates are expected to outweigh the effects of El Niño weather disturbance.

Results of the survey of private sector economists conducted by the Bangko Sentral ng Pilipinas (BSP) showed a lower inflation forecast of 2.5 percent for this year instead of the 2.7 percent average in the September survey.

The survey also indicated a lower inflation forecast of 2.7 percent for 2017 compared to the earlier forecast of 2.9 percent.

“The analysts attributed their lower inflation expectations mainly to lower global oil prices and lower domestic utility rates.

 These are likely to outweigh the upside risks brought by El Niño phenomenon, typhoons, increased expenditure from the upcoming election, robust consumer spending during the holiday season, weakening of the domestic currency, and possible adjustments in utility rates,” the BSP said in a report.

The BSP has set an inflation target of two to four percent for 2016 and 2017.

Inflation eased to a 20-year low of 1.4 percent last year from 4.1 percent in 2014 on the back of stable food prices and cheaper utility rates due to declining oil prices in the world market.

Last month, the BSP adjusted its inflation forecasts to 2.4 percent instead of 2.3 percent for 2016 and to 3.2 percent instead of 2.9 percent for 2017 due to the higher inflation in November, the impact of the weakening pesos against the dollar, and the increasing price of key commodities due to weather disturbances.

Dennis Lapid, deputy director of the BSP’s Department of Economic Research, said the minimum fare rollback to P7 for jeepneys as well as the continued decline in oil prices would be factored in the review of the BSP’s inflation forecast.

BSP Deputy Governor Diwa Guinigundo earlier said the country’s current monetary policy settings remain appropriate as inflation is projected to return gradually within the BSP target for 2016 and 2017.

Guinigundo said upside risks to inflation include the pending petitions for power rate adjustments and the impact of protracted El Niño weather conditions on food prices and utility rates, while the continued weakness in the global economy serves as the key downside risk to inflation.

 

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