Economists lower inflation forecast to 4.7% this year

MANILA, Philippines – Private economists have lowered their inflation forecast for this year to an average 4.7 percent from 4.8 percent despite the decision of monetary authorities to raise the target due to higher oil prices and more expensive electricity.

The Bangko Sentral ng Pilipinas (BSP) conducted a survey among private sector economists and analysts for March and the results showed that inflation expectations have improved.

Based on the results of the survey for March 2010, the central bank said private economists see inflation averaging 4.7 percent this year, 4.6 percent next year, and 4.4 percent in 2012.

“Analysts noted that the firm peso as well as modest demand conditions will dampen inflationary pressures,” the BSP said.

Deutsche Bank AG sees inflation this year at six percent followed by HSBC at 5.2 percent, Metrobank Group five percent, RCBC ranging from 4.2 percent to five percent, Standard Chartered Bank 4.6 percent, ATR Kim Eng 4.2 percent, and Banco de Oro 3.5 percent.

The BSP said its survey indicated an average forecast inflation rate of 4.5 percent in the second quarter of this year and 4.7 percent in the third quarter.

The BSP has set an inflation target of between 3.5 percent and 5.5 percent this year and three percent to five percent next year.

Last April 22, the BSP’s Monetary Board decided to jack up its inflation forecasts to 5.1 percent instead of 4.64 percent this year and 3.7 percent instead of 3.45 percent next year.

Monetary authorities see inflation hitting a high of six percent in June or July due to a possible wage increase, fare hike, and rising pump prices of petroleum products.

Inflation eased to 4.3 percent in the first quarter of the year from 6.9 percent in the same quarter last year. Inflation picked up to 4.4 percent in March from 4.2 percent in February on the back of rising prices of clothing, fuel, light and water and services.

The latest inflation forecast was based on the assumption that there would be a wage increase and fare hike in May and a continuing rise in oil prices.

Various groups are pushing for a P25 per day across-the-board wage hike while transport groups are petitioning a P0.50 rise in jeepney fares and P10 increase in flagdown rate for taxis.

Any wage increase will depend on the approval of regional wage boards while a fare increase needs to be approved by the Land Transportation Franchising and Regulatory Board (LTFRB).

Assuming that the wage hike and fare increase will not be approved, the BSP said inflation could average 4.4 percent instead of 5.1 percent this year and 3.2 percent instead of 3.7 percent next year. –Lawrence Agcaoili (The Philippine Star)