By Melissa Luz T. Lopez
Senior Reporter
BANK ANALYSTS expect inflation to slow in the next two years but to still clock in close to four percent, a recent central bank survey showed, with most seeing above-target readings over the next six months.
Results of the Private Sector Economists’ Survey of the Bangko Sentral ng Pilipinas (BSP) showed median inflation forecasts of four percent in 2019 and 3.8% for 2020. This will mean a huge drop from last year’s actual 5.2%, even as the estimates hover near the ceiling of the 2-4% target band set for those years.
Twenty-seven bank analysts took part in the December survey, which showed that they expected 2018 inflation to clock in at 5.3%, slightly higher than the actual figure released earlier this month.
Their 2019 and 2020 forecasts are substantially higher than those of the BSP which stood at 3.2% this year and three percent in 2020 as of their December review.
The same survey showed economists see inflation averaging five percent in January-March before easing to 4.4% next quarter.
In contrast, the central bank said inflation will sustain its sharp decline observed since November. Prices declined to six percent from October’s 6.7%, and further slid to 5.1% for December.
BSP Assistant Governor Francisco G. Dakila, Jr. said monetary authorities are “comfortable” with the pace of inflation easing, saying that their estimates showed a return to below four percent as early as the end of this quarter. “While analysts expect inflation to remain elevated in the near term, their assessment of the balance of risks to the inflation outlook has shifted toward the downside,” the BSP said in its fourth quarter inflation report published last Friday.
The bank economists cited the declining global oil prices, lower food and non-food item prices, expectations of further policy rate hikes by the BSP and the recovery of the Philippine peso against the dollar as the key reasons for a better inflation outlook.
At the same time, they said risks remain from potentially volatile world crude prices and trade tensions between major economies. At home, concerns include possible depreciation of the peso, an expected rise in transport fares and utility rates, as well as increased demand during the enrolment and holiday seasons which could push prices up faster.
“[I]nflation is anticipated to moderate over the medium term and revert to within the inflation target band as global oil prices decelerate and as monetary and non-monetary policy measures to temper inflation take effect,” the BSP added.
The Monetary Board raised benchmark rates by 175 basis points in 2018, which was an attempt to temper inflation expectations and prevent future price spikes. The government also took action by streamlining distribution of rice, meat and vegetables to rein in food cost pressures that fueled inflation’s surge in 2018.

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