Private sector economists raised its 2021 mean inflation forecast from 3.9 percent in February to 4.3 percent in March due to oil price movements, based on the Bangko Sentral ng Pilipinas (BSP) latest survey.

 The same analysts also revised higher its 2022 mean inflation forecast to 3.1 percent from the previous three percent, while the mean inflation forecast for 2023 remained at three percent. The survey of 24 analysts was conducted March 5 to 16.

The analysts’ inflation expectations are higher than the BSP’s 4.2 percent for this year and 2.8 percent 2022. The BSP’s inflation outlook is that from the first quarter to the third quarter this year, inflation rate will accelerate above the two-four percent target due to the transitory impact of supply-side price pressures. By end-2021 until the first quarter next year, it expects inflation to decelerate below the midpoint of the target range before settling near the three-percent level by the second half of 2022 with the moderation of global oil and non-oil prices.

The Private Sector Economists’ Inflation Forecasts for March of 4.3 percent is more significantly higher than its end-December 2020 forecast of 2.9 percent for 2021 inflation.

“Analysts expect inflation to remain elevated in the near term, with risks to the inflation outlook tilted to the upside due to supply disruptions and rising global crude oil prices,” said the BSP. “Nonetheless, analysts expect the BSP to keep its accommodative stance to provide support to the economy’s recovery.”

According to the survey, analysts expect upside risks to inflation will come from the following: supply disruptions brought about by adverse weather conditions and African Swine Fever; rising global crude oil prices, which could push up

transportation costs; and higher government spending, renewed consumer demand, and normalization of business operations.

The survey also included the continued rollout of vaccines, low interest rate environment, and base effects as factors for the latest economists’ forecasts.

“Downside risks to inflation are seen to emanate mainly from subdued domestic demand due to low purchasing power and implementation of localized lockdown measures amid the recent spike in new COVID-19 cases, which could slow the pace of economic recovery,” said the BSP. “Meanwhile, the implementation of the 60-day price ceiling on selected pork and chicken products (Executive

Order No. 124), importation of such products, and mobilization of domestic meat supply from the provinces to the Metro areas are anticipated to ease price pressures.”

Of 24 economists surveyed, 18 said there is a 33.3 percent probability that average

inflation for 2021 will settle within the government’s target of two-four percent, but a higher 66.2 percent probability said it will rise above four percent.

The probabilities that inflation will fall within the target band in 2022 and 2023 are  at 75.8 percent and 77.9 percent, respectively, said the BSP.

Inflation averaged at 4.5 percent in the first quarter this year. BSP Governor Benjamin E. Diokno, during Thursday’s first quarter inflation virtual press briefing, said BSP’s latest projections show a higher inflation path over the policy horizon. “Average inflation could exceed the upper end of the government’s target range (in) 2021, but will likely return to within the target band in 2022. Indeed, the observed uptick in inflation is largely transitory, especially as various non-monetary interventions are being put in place to alleviate the constraints to domestic food supply.”

Diokno reiterated that the BSP “recognizes that rising inflation could spill over to the rest of the economy through potential second-round effects. Hence, the BSP is prepared to take immediate measures as appropriate to help anchor inflation expectations, in line with the BSP’s price and financial stability objectives.”

Source: Manila Bulletin (