INFLATION will remain subdued this year mainly because of low oil prices and slower global growth, according to the latest survey of private sector economists conducted by the Bangko Sentral ng Pilipinas for March 2016.
The survey yielded a lower-mean-inflation forecast for 2016 relative to the results of the December 2015 survey.
The mean inflation forecast for 2016 declined to 1.9 percent from 2.5 percent in December. By contrast, the average annual inflation forecast for 2017 was unchanged at 2.7 percent from the December 2015 survey results. Meanwhile, mean inflation forecast for 2018 was at 3 percent.
“Analysts attributed their lower inflation expectations to continued low global oil prices, slower global economic growth and lower domestic electricity rates,” the Bangko Sentral said.
“These are likely to outweigh the upside risks brought by the El Niño phenomenon, increased government expenditures from the upcoming elections, pending power rate adjustments, rebound in oil prices, base effects in the CPI data, possible occurrence of La Niña in the latter part of 2016, and prospects of rising US interest rates,” Bangko Sentral said.
Based on the probability distribution on the forecasts provided by 23 out of 28 respondents, there is a 46.3-percent chance the average inflation for 2016 will settle between the 1.0- and 1.99-percent range.
Meanwhile, there is a 46.4-percent chance 2016 inflation rate will fall within the 2 percent-to-4 percent target range.
For 2017, the respondents assigned a 65.5-percent chance inflation will fall within the 2-4 percent target range.
Earlier, ING Bank Manila senior economist Joey Cuyegkeng said in a report the Bangko Sentral was likely to keep policy settings steady in the near term due mainly to low oil prices and expected more robust economic growth this year.
Cuyegkeng said the expectation received support from the failed Doha meeting about freezing oil output. He said the downside risk to the 2017 inflation forecast had increased in the absence of an agreement to freeze oil production.
The Monetary Board on its March 23, 2016 meeting kept the benchmark interest rates steady for the 12th consecutive time since October 2014 due to a manageable inflation environment.
The last time the board changed the policy stance was in September 2014, when overnight borrowing was increased to 4 percent and overnight lending adjusted to 6 percent.
The economy grew 5.8 percent in 2015, lower than 6.1 percent a year ago and the government’s target range of 7 percent to 8 percent but remained one of the fastest growing in the region.
The government expects GDP this year to grow between 6.8 percent and 7.8 percent anchored mainly on sustained robust domestic demand.
Inflation in the first quarter averaged 1.1 percent, way below the government’s official forecast range of 2 perent to 4 percent. Inflation in January decelerated to 1.3 percent from 1.4 percent in December 2015.