Bangko Sentral ng Pilipinas Governor Benjamin Diokno said over the weekend inflation will remain manageable in 2022 and 2023 unless world crude prices continue to increase in the coming months.
Diokno earlier projected inflation to average 3.4 percent in 2022 and 3.2 percent in 2023, both within the target range of 2 percent to 4 percent.
“The BSP’s inflation projection is based on the assumption that Dubai crude oil will average $72.66 per barrel in 2022 and $68.74 per barrel in 2023. We explored various oil price scenarios ranging from $50 to $100 per barrel,” he said.
“The assumption is that oil prices are sustained at these levels starting January 2022. Results of the simulation: inflation could settle above the target range if crude oil prices average higher than $95 per barrel for 2022 and 2023,” Diokno said.
He said the scenario analysis considered only the direct effects and did not incorporate any potential second-round effects on transport fares, food prices, wage increase and others.
“Other things constant, our inflation forecasts for 2022 and 2023 would hold unless world crude prices settle above $95.00 per barrel from January 2022 until December 2023,” he said.
Inflation settled at 3.6 percent in December, the first time it fell within the target range for the year. It brought the average inflation last year to 4.5 percent.
“For this year, inflation is likely to [be] lower than the midpoint in Q1 before it goes above the midpoint in Q2 to Q4,” Diokno said.
Diokno said BSP’s analysis supported the view that future oil prices remained in backward action, where near-term contracts have a higher price compared to longer-term contracts.
“This view is consistent with the latest assessment of international energy agencies,” he said.
Meanwhile, the Department of Finance said in an economic bulletin the slowdown in inflationary trend should continue with the unhampered implementation of Department of Agriculture’s programs in mitigating food supply concerns.
“The DA needs to streamline further its importation procedures, particularly on labeling and requirements that reduced MAV Plus utilization to 65 percent. The transportation and distribution of food items must proceed unhampered,” Finance Undersecretary and chief economist Gil Beltran said.
Beltran said the decline in inflation last month could be traced to both food and non-food groups. Food inflation fell to 3.19 percent, while non-food inflation eased to 3.65 percent after peaking during the year to 4.10 percent in November.
Rice inflation moderated from 0.99 percent in November to 0.90 percent in December; fish, from the peak of 12.39 percent in August to 6.97 percent in December, and; vegetables further decelerating from minus 1.85 percent in November to minus 9.97 percent in December.
Transportation inflation eased from 8.84 percent in November to 6.13 percent in December following hefty rollback in the pump prices of petroleum products. Dubai crude oil prices averaged $72.8/bbl in December, down from $79.9/bbl in November.