BSP to review inflation forecast

MANILA, Philippines – Monetary authorities are expected to review the country’s latest inflation forecast during the meeting of the central bank’s Monetary Board on June 3 in light of the stronger-than-expected gross domestic product (GDP) growth in the first quarter of the year.

Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. told reporters on the sidelines of the 57th Annual National Convention and Corporate Meeting of the Rural Bankers Association of the Philippines (RBAP) that monetary authorities would assess the impact of the 7.3 percent GDP growth registered in the first quarter of the year on consumer prices.

“As you know we are going to have our policy meeting this week and among the factors that we are going to consider in the assessment is the higher than expected growth for the first quarter of 2010. We’d like to look at this in terms of the possible impact on inflation together with other factors like the global economic growth as well as movement in international commodity prices,” Tetangco stressed.

He pointed out that the Monetary Board would look at the impact of growth on prices as well as the effects of international developments including Europe’s debt crisis and the growing tension between North and South Korea.

“We want to take a look at the domestic growth in the context of what is happening also in the global economy and how this will affect commodity prices worldwide. It is something that we see as important and is going to be a part of the assessment,” he added.

During their meeting last April 22, the BSP raised its inflation forecast to 5.1 percent instead of 4.64 percent this year and 3.7 percent instead of 3.45 percent next year assuming that there would be a wage increase and fare hike in May and at the same time the rising trend in oil prices would continue.

Despite the upward adjustment last April, Tetangco said inflation forecast would still fall within the BSP target of 3.5 percent to 5.5 percent this year and three percent to five percent next year.

“As I said forecast will be reviewed, so far the current forecast show a within target inflation average for this year and for next year,” the BSP chief stressed.

Earlier, monetary authorities said inflation could hit a high of six percent either in June or July due to a possible wage increase, fare hike, and rising pump prices of petroleum products before easing towards the end of the year.

Latest data from the National Statistics Office (NSO) showed that inflation eased to 4.3 percent in the first four months of the year from 6.4 percent in the same period last year. The BSP sees inflation ranging from 4.2 percent to as high as 5.1 percent in May from 4.4 percent in April.

The country’s GDP zoomed to its fastest pace in almost three years after expanding by 7.3 percent in the first quarter of the year from only 0.5 percent in the same quarter last year.

Economic managers through the Cabinet-level Development Budget Coordination Committee (DBCC) see the country’s GDP expanding between 2.6 percent and 3.6 percent this year after slackening to 0.9 percent in 2009 from 3.8 percent in 2008 due to the full impact of the global economic slowdown.

This early, BSP Deputy Governor Diwa Guinigundo said the stronger-than-expected economic growth registered in the first quarter of the year would not result to runaway inflation this year on the back of stable oil and commodity prices as well as lower wage adjustments. –Lawrence Agcaoili (The Philippine Star)