THE Bangko Sentral ng Pilipinas (BSP) reported that economists projected the country’s inflation to settle at 2.7 percent this year, higher than its 2.5-percent full-year forecast but still within its 2 to 4-percent target.
In its Third Quarter Inflation Report released over the weekend, the central bank said the latest figure was lower than the 2.9 percent in the June 2019 survey.
“Analysts expect inflation to remain manageable and lie within the government’s target range,” it added.
Economists see key downside risks to consumer price growth to come from the continued implementation of non-monetary policy actions to increase local food supply and stabilize prices, such as the Rice Tariffication Law.
The BSP said “domestic rice prices could decline to levels similar to that of major import sources of rice, such as Thailand and Vietnam,” because of the implementation of the Rice Tariffication Law in March and the accelerated issuance of certifications for the private sector’s out-quota rice importation by the National Food Authority.
Stable global crude oil prices are another risk, which were expected to remain subdued until 2021 in line with the projections of the Energy Information Administration, along with other international agencies.
“The slower global economic outlook and the escalation of trade tensions remain as downside risks,” the Bangko Sentral said.
It explained that the imposition of additional trade barriers would raise consumer prices and the cost of capital goods, thus dampening momentum from consumption and investment.
Other risks cited were base effects; lower electricity rates; and easing domestic rice and other food prices.
Possible upside risks are the adverse effects of weather conditions on domestic food supply; the weaker peso against the US dollar; and higher domestic demand during the holiday season.
Expectations of elevated pork prices on account of the African swine fever (ASF) outbreak in the country and increased demand for other meat products, such as chicken, are also regarded as risks.
According to the Bangko Sentral, meat products account for 6.2 percent of the consumer price index basket, of which 4.8 percent is from fresh or frozen meat and 1.4 percent from canned and processed ones.
“The outbreak of ASF is expected to lower domestic hog supply and also temper demand,” it said.
Geopolitical tensions and the potential rebound in global oil prices were also said to present risks over the near term.
The BSP said increased geopolitical tensions in the Middle East followed last month’s drone strike on Saudi Arabia’s oil facilities and the likelihood of more attacks could result in supply disruptions, raising global fuel prices.
“Higher excise taxes for alcoholic beverages present an additional upside risk to inflation,” it added.
In August, the House of Representatives approved House Bill 1206, which aims to raise the sin taxes on alcoholic beverages.
Under the measure, the taxes of distilled spirits, wines and fermented liquor specified in the Sin Tax Reform Act of 2012 would be raised, in addition to the higher annual indexation of 7.0 percent from the previous 4.0 percent.