Inflation seen rising this year

MANILA, Philippines — Economists of private banks have raised their inflation forecasts for 2021 as the  economy gradually reopens, according to a survey conducted by the Bangko Sentral ng Pilipinas (BSP).

Zeno Ronald Abenoja, senior director of the BSP’s Department of Economic Research (DER), said that private sector economists  expect a higher inflation   of 2.9 percent this year compared to the original target of 2.8 percent. For 2022, they retained their inflation forecast of three percent.

Abenoja said the latest projections of economists are well within the mid-point of the central bank’s two to four percent target for 2021 and 2022.

“Analysts expect inflation to remain benign in the near term, with risks to the inflation outlook tilted to the upside as the economy gradually reopens,” Abenoja said.

He said upside risks to inflation identified by economists include food supply disruptions due to the recent typhoons and the likely occurrence of weather disturbances in the near term amid the La Niña, as well as the rebound in oil prices on the possible recovery of demand,

On the other hand, Abenoja said analysts expect downside risks to inflation to emanate from muted domestic demand as consumer confidence remains weak and low purchasing power amid high unemployment rate, strong peso and soft global crude oil prices.

Based on the probability distribution of the forecasts provided by 20 out of 24 respondents, there is a 91 percent probability for 2021 and 91.5 percent for 2022 that average inflation would settle between the two and four percent range.

Robinsons Bank, Al-Amanah Islamic Bank and Philippine Equity Partners expect inflation this year to average at 3.5 percent followed by BDO at 3.41 percent, Japan’s Mizuho Bank at 3.1 percent, Rizal Commercial Banking Corp. ranging from 2.6 to 3.1 percent,  and Maybank at 3.02 percent.

For 2022, Al-Amanah Bank sees inflation averaging 3.5 percent followed by Security Bank, Nomura, and Philippine Equity Partners at 3.3 percent, Bangkok Bank and Mizuho Bank at 3.2 percent, BDO at 3.17 percent, and EastWest Bank at 3.1 percent.

BSP officer-in-charge Francisco Dakila Jr. said earlier that inflation may stay above three percent for most part of 2021 before easing toward the later part of the year.

“Looking ahead, the BSP sees ample room to maintain its accommodative monetary policy stance in 2021 on the back of a benign inflation outlook and well anchored inflation expectations,” Dakila said.