DBS Bank of Singapore said Wednesday it expects inflation rate in the Philippines to rise to 2.5 percent in 2016 from 1.4 percent last year, on the back of higher food prices.
“[The] December 2015 inflation came in slightly higher than we had expected. CPI inflation registered 1.5 percent year-on-year while core inflation was at 2.1 percent. With core inflation trending upwards once again, we are likely to see CPI inflation inching gradually higher this year,” DBS said in a report Wednesday.
“This is especially true considering anticipation of higher food prices this year. We forecast CPI inflation to tick up to 2.5 percent in 2016 from 1.4 percent last year,” the foreign bank said.
Inflation in December accelerated to 1.5 percent from 1.1 percent in November. This brought the average inflation in 2015 to 1.4 percent, below the government’s target range of 2 percent to 4 percent for the year.
DBS said that given the 2 percent to 4 percent target range, inflation was still at a comfortable level.
“Not that Bangko Sentral ng Pilipinas is concerned… It is interesting that the BSP was actually a tad dovish following the December 2015 inflation data release,” the bank said.
It said global growth risks were playing a part in how Bangko Sentral calibrated its policy stance going forward.
“For now, however, the BSP seems fairly sanguine about GDP growth prospect. It is hard to disagree. Domestic demand remains strong, bolstered by private consumption growth,” DBS said.
It said overall investment growth remained very close to the double-digit territory, offsetting any drag from external demand. It said as far as export growth was concerned, exports of electronics continued to grow at 8 percent annual pace, despite the fall in overall exports.
“Look for stronger cues once the full-year 2015 GDP data report is out at the end of the month. At this juncture, we reckon that GDP growth may tick up back to 6 percent in 2016. Given that the BSP remains focused on longer-term sustainability, there is a good chance to see a 25 bps rate hike in the second half of 2016,” it said.
Bangko Sentral Governor Amando Tetangco Jr. earlier said there was no reason to tweak the current policy stance despite the acceleration of inflation.
Tetangco said the risks to inflation remained the same, such as uneven global growth prospects, oil prices and a harsher El Niño dry spell.