According to a survey conducted by the Bangko Sentral ng Pilipinas (BSP), as the economy gradually reopens, economists of private banks have raised their inflation projection for the year 2021.
The private sector economists expect higher inflation of 2.9% this year, in contrast to the original target of 2.8%. For 2022 however, they retained their inflation projection of three percent, said Zeno Ronald Abenoja, senior director of the BSP’s Department of Economic Research (DER).
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, Abenoja stated. “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 also mentioned that due to the recent typhoons and the likely occurrence of weather disturbances in the coming days amid the La Niña, there have been food supply disruptions. The upside risks to inflation identified by economists include food supply disruptions and the rebound in oil prices.
Conversely, Abenoja stated that as consumer confidence remains weak and low purchasing power amid high unemployment rate, the strong peso, and soft global crude oil prices, the downside risks to inflation emerges from the muted domestic demand.
Based on the probability distribution of the forecasts provided by 20 out of 24 participants, the average inflation would settle between the two and four percent range. 91% probability for 2021 and 91.5% for 2022.
Robinsons Bank, Al-Amanah Islamic Bank, and Philippine Equity Partners expect the inflation year 2021 to average at 3.5 percent. This is followed by BDO at 3.41 percent, then Japan’s Mizuho Bank at 3.1 percent, after that, the Rizal Commercial Banking Corp. ranging from 2.6 to 3.1 percent, and lastly the Maybank at 3.02 percent.
For the year 2022, Al-Amanah Bank perceives the inflation to average at 3.5 percent, followed by Security Bank, then, Nomura, and the Philippine Equity Partners at 3.3 percent, the Bangkok Bank and Mizuho Bank at 3.2 percent, while BDO at 3. 17 percent, lastly the EastWest Bank at 3.1 percent.
Francisco Dakila Jr. stated that for most of 2021, the inflation may stay above three percent 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.