Private sector economists see higher inflation rate this year on increasing global oil prices and supply disruptions because of quarantines imposed by the government to curb the spread of COVID-19, according to a survey conducted by the Bangko Sentral ng Pilipinas.
Results of the BSP’s survey of private sector economists for September showed higher mean inflation forecast for 2021 at 4.3 percent, up from 4.1 percent based on the June 2021 survey. The mean inflation forecast for 2022 was unchanged at 3.2 percent, while the mean inflation forecast for 2023 was higher at 3.2 percent from 3.1 percent.
“Analysts expect inflation to remain slightly above the upper end of the government’s target range [of 2 to 4 percent] in 2021, with broadly balanced risks surrounding the outlook,” the survey said.
The upside risks to inflation include supply disruptions brought about by the reimposition of stricter quarantine measures, adverse weather conditions during the rainy season, persistence of African swine fever, rising global crude oil prices and weakening of the peso against the US dollar.
The downside risks to inflation are seen to emanate mainly from subdued domestic demand due to low purchasing power (brought about by high unemployment) and the prolonged and stricter lockdown measures amid the local transmission of the Delta variant, which could weigh down on recovery efforts.
Another downside risk revolves around increased food importation following the implementation of lower import tariffs on pork and rice, which are seen to augment domestic food supply and lower food prices.
“The BSP is seen keeping current policy settings unchanged for the rest of 2021 to support the economy’s gradual recovery,” the survey said.
Meanwhile, inflation is expected to settle close to the midpoint of the target by 2022 and 2023, with most of the analysts anticipating the BSP to end its accommodative stance by end-2022.
Based on the probability distribution of the forecasts provided by 17 out of
21 respondents, there was a 17.2-percent probability that averaged inflation for 2021 would settle within the 2 percent to 4 percent range, while there was an 82.3-percent chance that inflation would rise above 4.0 percent.
Meanwhile, the probabilities that inflation will fall within the target band in 2022 and 2023 are seen at 84.2 percent and 86.7 percent, respectively.