July 22, 2019
ECONOMISTS project inflation to settle at 2.9 percent this year, the Bangko Sentral ng Pilipinas (BSP) said, noting that this figure was higher than its 2.7-percent full-year forecast, but still within its 2-4 percent target.
In its Second Quarter Inflation Report released last Friday, the central bank said the latest figure was a decrease from 3.3 percent in the March 2019 survey.
“Analysts expect inflation to remain manageable and within the government’s target range, with risks to the inflation outlook likely to be broadly balanced,” it added.
Economists see key upside risks to inflation to come from the adverse effect of weather conditions, brought about by a weak El Niño, on domestic food supply; volatile global crude oil prices; higher domestic demand, particularly in the fourth quarter due to the Christmas season; weaker peso against the US dollar; higher government spending on infrastructure; and the potential impact of African swine fever on local pork prices.
According to the report, the latest assessment of the Philippine Atmospheric, Geophysical and Astronomical Services Administration showed that slightly warmer average temperatures would last until the end of 2019.
In May, the country’s economic managers revealed their “catch-up plan” that set an infrastructure spending target of P792.97 billion for the rest of the year after actual infrastructure spending reached only P207.2 billion in January to March.
Meanwhile, possible downside risk to inflation are base effects; the continued implementation of non-monetary policy actions to increase domestic food supply and stabilize prices, such as Republic Act 11203 or the Rice Tariffication Act, rice imports, and the mitigating measures put in place by the Department of Agriculture against El Niño; and easing global crude oil prices.
“With the implementation of the Rice Tariffication Law and the accelerated issuance of certifications for the private sector’s out-quota rice importation by the NFA (National Food Authority), domestic rice prices could decline to levels similar to major import sources of rice, such as Thailand and Vietnam,” it added.
On the other hand, the Bangko Sentral noted that estimated futures prices of Dubai crude oil as of end-June 2019, which are based on movements of Brent crude oil, showed a lower path for 2019 to 2023, compared with estimates in the previous quarter.
Citing the June 2019 US Energy Information Administration report, the BSP said world oil supply was expected to reach 100.85 million barrels per day (mb/d) thos year, slightly lower than the projected world oil demand of 101.14 mb/d.
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