With inflation expected to remain a concern in Asia and the Pacific, Moody’s Analytics expects monetary authorities in the region to continue raising interest rates until the middle of 2023.
In its Asia Pacific Economic Preview, Moody’s Analytics said many countries in the region, including the Philippines, Indonesia, and Thailand, saw higher prices which indicates that prices could remain elevated in the first few months of the year.
Core inflation, excluding food and energy prices, in Asia and the Pacific also remains elevated. In the Philippines, core inflation accelerated to 6.9 percent; Indonesia, 3.4 percent; and Thailand, 3.2 percent.
“We see central banks in the region hiking rates into the middle of the year. In addition to elevated inflation, ongoing rate hikes by the US Federal Reserve will put pressure on central banks to raise interest rates to prevent interest rate differentials from widening,” Moody’s Analytics said.
Commodity prices may remain elevated because of supply chain disruptions caused by the Russian invasion of Ukraine. However, Moody’s Analytics noted that the supply shocks have already eased in recent months.
Contributing to higher prices are extreme weather conditions that would make commodities like food more expensive.
“Supply chain disruptions last year have caused consumer prices to skyrocket, and inflation will remain a concern in the early parts of this year,” Moody’s Analytics said.
“Food prices, however, have the potential to remain high because of extreme weather conditions and elevated costs of labour and input material,” it added.
Earlier, local economists have proposed a number of measures, including going after smugglers and hoarders as well as raising real wages, to rein in inflation and stimulate the economy this year.
In an email to BusinessMirror, former Dean of the University of the Philippines School of Labor and Industrial Relations Rene Ofreneo said the recent spike in inflation can be contained if the government will run after smugglers and hoarders.
Ofreneo said disruptions caused by the Russia-Ukraine war are expected to continue, as well as the US-China trade tensions, albeit at a lesser degree. These are among the factors that will make trade an important area for the government to focus on this year.
Inflation is not the only concern, however. Former Socioeconomic Planning Secretary Dante B. Canlas said real wages have been declining and workers are due for an increase to cope with high prices.
Canlas said the government can start with adjustments in the wages of teachers, doctors and allied medical workers in public schools and hospitals. These workers can help the government address education and health gaps.
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