Private economists cut inflation forecast to 4.7% in ’11, 4.3% in ’12

MANILA, Philippines – Private economists and analysts slashed their inflation forecasts for this year and next year as concerns about the fragile global economic growth have eased due to moves to ensure steady supply of oil as well as efforts to address the debt crisis in Europe, a survey conducted by the Bangko Sentral ng Pilipinas (BSP) showed.

Based on the BSP’s Private Sector Economists’ Inflation Forecast, inflation would average 4.7 percent instead of the previous quarter’s forecast of 4.9 percent for 2011 and 4.3 percent instead of the previous quarter’s assumption of 4.8 percent for 2012.

The BSP cited the decision of the 30-member International Energy Agency (IEA) to beef up oil supply to prevent higher oil prices as well as moves by the European Union to address the debt crisis in the eurozone.

“Analysts were of the view that, Europe’s financial woes as well as the IEA’s recent release of strategic oil reserves to prevent high oil prices from undermining the fragile global economic recovery, would dampen inflation pressures,” the BSP stressed.

However, analysts believe that higher prices of commodities would continue to put pressure on inflation.

The survey showed that British banking giant Hong Kong and Shanghai Banking Corp. (HSBC), Goldman Sachs, and the Metrobank Group see inflation averaging five percent this year while Bank of China sees consumer prices hitting 4.9 percent this year.

Bank of America Merrill Lynch, Deutsche Bank, and Philippine Equity Partners believe inflation would average 4.8 percent this year followed by Asia ING and UBS that see consumer prices hitting 4.7 percent while Forecastweb and MIB sees inflation averaging 4.5 percent.

Meanwhile, Rizal Commercial Banking Corp.sees inflation ranging between 4.4 percent and 4.7 percent this year while Banco de Oro believes inflation would hit 4.37 percent and Bank of Commerce sees inflation averaging four percent.

For 2012, Bank of China sees the country’s inflation averaging 5.25 percent followed by Goldman Sachs and Metrobank with five percent, Asia ING with 4.6 percent as well as BDO and HSBC with 4.5 percent. Bank of America Merrill Lynch and Philippine Equity Partners believe inflation would average 4.2 percent followed by Deutsche Bank with 4.1 percent, MIB with 4.2 percent, UBS with 4.1 percent, Bank of Commerce with 3.6 percent, and RCBC with a range of 2.9 percent to 3.7 percent.

Based on the results of the BSP’s survey of private economists for June 2011, the central bank said inflation would be within the target range for both 2011 and 2012.

“Mean inflation forecasts in the BSP survey of private economists edge lower and remain within the target range,” the BSP said.

The BSP has set an inflation range of three percent to five percent between 2011 and 2014. Latest inflation forecast of the BSP’s Monetary Board showed a lower inflation of 4.7 percent instead of 5.06 percent this year and 3.74 percent instead of 3.9 percent for next year.

Latest data released by the National Statistics Office (NSO) showed inflation remained steady at 4.6 percent in July bringing the average inflation to 4.3 percent in the first seven months of the year from 4.2 percent in the same period last year.

The BSP’s Monetary Board raised interest rates by 25 basis points last March 24 and by another 25 basis points last May 5 as a preemptive move to keep inflation expectations well anchored amid the rising global oil prices as well as second round effects including transport fare hike, higher wages, among others.

This brough the overnight borrowing rate to 4.50 percent and the overnight lending rate to 6.50 percent.

The central bank slashed key policy rates by 200 basis points between December 2008 and July 2009 to cushion the impact of the global financial crisis on the domestic economy.

Authorities managed to keep interest rates steady at record lows of four percent for the overnight borrowing rate and six percent for the overnight lending rate for 20 straight months dating back in July 2009 due to the benign inflation outlook. –(The Philippine Star)