Private sector economists expect a faster inflation in 2018 and in the next two years, on higher oil prices, weaker peso and the impact of the implementation of the Tax Reform for Acceleration and Inclusion law on prices of goods, results of a survey conducted by the Bangko Sentral ng Pilipinas show.
The mean inflation forecast for 2018 was adjusted to 4.5 percent in the June 2018 survey from 4.1 percent in the March 2018 survey. Likewise, mean inflation forecasts for 2019 and 2020 were both raised to 3.8 percent, from 3.7 percent and 3.6 percent, respectively.
“Analysts noted that risks to inflation in 2018 remain tilted to the upside. Possible upside risks to inflation are the higher and volatile global oil prices, weakening peso, effects of the Train law on the prices of domestic goods, higher government spending and potential rise in wages,” the Bangko Sentral said.
Other reasons for the uptick in inflation were the adverse weather conditions, higher utility rates and the rising global inflation.
“The key downside risk to inflation was seen to emanate from the removal of quantitative restrictions on rice importation which could reduce domestic rice prices,” the survey said.
However, inflation is expected to moderate, stabilize and settle within the 2 percent to 4 percent target range in 2019 to 2020 as Train’s inflationary impact tapers off.
Based on the probability distribution of the forecasts provided by 20 out of 24 respondents, there was a 16.6-percent probability that average inflation for 2018 would settle between the 2 percent and 4 percent range, while there was an 82.8-percent chance that inflation would rise beyond 4 percent.
For 2019, the respondents assigned a 60.8-percent probability that inflation would fall within the 2 percent to 4 percent range.
Inflation in June accelerated to a more than five-year high of 5.2 percent from 4.6 percent in May and surpassed the government forecast for the month, triggered by faster increases in the prices of some food and beverage products.
The June inflation, based on the 2012 price index, was also significantly faster than 2.5 percent a year ago. This brought the average inflation in the first half to 4.3 percent, beyond the government’s target range of 2 percent to 4 percent for 2018.