Economists raise inflation forecasts

MANILA, Philippines –  Private economists and analysts see a higher inflation of 4.9 percent this year and 4.8 percent next year due to the continued tensions in Middle East and North African (MENA) states as well as rising oil and food prices in the world market, a survey conducted by the Bangko Sentral ng Pilipinas (BSP) showed.

Based on the BSP’s Private Sector Economists’ Inflation Forecast, inflation would average 4.9 percent this year instead of the previous quarter’s forecast for 2011 and 4.8 percent next year instead of the previous quarter’s assumption of 4.1 percent.

The respondents see inflation higher at 3.8 percent instead of 3.7 percent in 2013.

“Analysts noted that sustained increases in global food and oil prices, heigthened by lingering political tensions in the MENA states and the impact of adverse weather conditions on agriculture, could led to a substantial pickup in inflation over the next few months,” the BSP reported.

The survey showed that the Nomura of Japan sees inflation averaging 6.1 percent this year followed by the Metrobank Group with 5.9 percent, Deutsche Bank with 5.6 percent, Bank of China with 5.5 percent, HSBC with 5.4 percent, and Goldman Sachs with 5.0 percent.

RCBC sees inflation averaging between 4.7 percent and 5.9 percent this year followed by Bank of Commerce with 4.7 percent, Al Amanah and Forecastweb with 4.5 percent, Banco de Oro with 4.3 percent, Bank of America – Merrill Lynch and Philippine Equity Partners with 4.2 percent, and ATR with 4.1 percent.

For 2012, Nomura sees inflation at 6.4 percent followed by Bank of China at 6.0 percent; Metrobank, 5.1 percent; Deustche Bank and Philippine Equity Partners, 5.0 percent; Goldman Sachs, 4.8 percent; and HSBC, 4.5 percent.

“Mean inflation forecasts in the BSP survey of private economists rise but remain within the target range,” the BSP said.

The central bank added that the sustained strengthening of the peso against the dollar is expected to help temper the impact of imported inflation.

Latest data released by the National Statistics Office (NSO) showed inflation kicked up to a one-year high of 4.5 percent in April bringing the average inflation to 4.2 percent in the first four months of the year from 4.3 percent in the same period last year.

The BSP 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.

Without the rate hike, the BSP said inflation expectations for 2011 would have gone up to 5.6 percent and for 2012 would have increased to 4.2 percent.

With the rate hike, inflation expectations for 2011 and 2012 is now back to within the target of three percent to five percent set for 2011 until 2014.

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 4.0 percent for the overnight borrowing rate and 6.0 percent for the overnight lending rate for 20 straight months dating back in July 2009 due to the benign inflation outlook. –Lawrence Agcaoili (The Philippine Star)