PRIVATE economists see inflation averaging at 5.4 percent in 2022, parallel with the Bangko Sentral ng Pilipinas’ (BSP) latest forecast on consumer price growth for the year.
Results of the BSP’s survey of private sector economists for August 2022 showed higher mean inflation forecast for 2022 at 5.4 percent from 5.3 percent in the July 2022 survey. The private economists’ forecasts align with the 5.4-percent forecast announced by the BSP in their latest monetary policy meeting on August 18.
Analysts, however, were not yet convinced that inflation will recede to within-target for 2023. The survey showed that private economists’ mean inflation forecast for next year at 4.2 percent.
This is a more pessimistic view than the BSP’s 4-percent forecast for 2023 as announced in August. The target band for next year is still at 2 to 4 percent.
“Analysts expect inflation to breach the upper-end of the government’s target range in 2022, with risks to the inflation outlook tilted to the upside amid lingering inflationary pressures brought about by global supply chain disruptions, second-round effects, and continued depreciation of the peso against the US dollar,” the BSP’s report read.
“Meanwhile, inflation is expected to settle above the upper end of the target in 2023 and decelerate to within the target range in 2024. Most of the analysts anticipate the BSP to further tighten monetary policy settings and increase the reverse repurchase rate by a range of 25 to 150 basis points in 2022, with the possibility of taking a pause in its tightening cycle in 2023 and 2024,” it added.
In terms of balance of risks, analysts pointed to the following: the still elevated global food and oil prices amid global supply chain disruptions brought about by the ongoing Russia-Ukraine war; as well as the continued Covid-19-related lockdowns in China and local weather disturbances and the higher prices of selected goods and services as a delayed reaction to rising input costs.
Analysts also said the continued depreciation of the peso against the US dollar, due in part to the aggressive policy rate hikes by the US Federal Reserve, and second-round effects such as higher transport costs and wage hikes may also continue to push inflation upward for the year.
On the other hand, they observed that the recent easing of global oil prices is a possible source of downside risk to the inflation outlook.
Other downside risks cited are expectations of policy rate hike by the BSP, resurgence of
Covid-19 cases, fears of an impending global economic recession, along with weaker-than-expected global economic recovery due to the slowing down of China’s economy.