Soaring commodity prices may have continued to curb consumer spending last month, with Bangko Sentral ng Pilipinas and several private sector economists forecasting the inflation rate to settle within 7.2 percent to 8.3 percent for January 2023.
The analysts provided their insights in a poll of economists conducted by Daily Tribune last week ahead of the Philippine Statistics Agency’s expected release tomorrow, 7 February, of last month’s inflation rate.
In a Viber message, Rizal Commercial Banking Corp. chief economist Michael Ricafort estimated the country’s inflation rate for January 2023 to settle at 7.2 percent.
“Seasonal increase in holiday demand and spending (is) already done and over with in December 2022, (which could) thereby lead to some seasonal easing in the prices of some goods and services in January,” Ricafort said.
He added that the prices of onions have already “started to go down” after the holiday season in December 2022, given the harvest season and some importation in January 2023 that fundamentally led to higher supply to meet demand.
Union Bank of the Philippines’ chief economist Ruben Carlo Asuncion told the Daily Tribune in an emailed report that the January 2023 inflation may have clocked in at 7.7 percent.
Easing pressures
He said low base effects would affect core inflation to remain elevated in the 7 percent to 8 percent year-on-year range in the first half of 2023 before succumbing to easing pressures in the second half to end the year at 4.2 percent.
“Except for CPI (Consumer Price Index) restaurants and accommodation services, we note that most CPI clusters will settle for lean, single-digit rates at the close of 2023,” Asuncion said.
In a separate Viber message, China Bank chief economist Domini Velasquez said the country’s inflation remained elevated in January with an estimate of 7.6 percent.
She attributed the inflation rate to additional emerging price pressures such as the approved water tariffs of Manila Water and Maynilad, higher electricity rates, and another consecutive round of fuel price increases.
“We observed some slowdown in food prices this January and anticipated lower prices of other non-food items such as restaurants, clothing, rent, etc. as demand likely fell after Christmas,” Velasquez said.
She added that the risks remain tilted on the upside in February, given the possible increase of LRT/MRT fares.
She said China’s reopening and higher-than-previously anticipated global growth will likely keep commodity prices high.
“We still expect average inflation for the year to be way above the BSP’s 2 to 4-percent target, possibly hitting 5.3 percent this year,” she said.
She added that the recent government initiatives to temper food price increases should provide some relief.
She, however, said the government “should also be cognizant” and proactive in addressing additional price pressures, such as increasing egg prices due to avian flu and calls for higher wage and transport fare hikes.
BSP’s take
Last week, Bangko Sentral ng Pilipinas said it expected the country’s January 2023 inflation rate to settle within 7.5 to 8.3 percent.
The pressures for January this year are expected to stem from higher domestic petroleum prices, an uptick in the costs of key food items, and the annual increase in sin taxes, higher electricity rates, and approved water rate rebasing.
“The BSP will continue to adjust its monetary policy stance at the necessary pace to prevent the further broadening of price pressures and monitor emerging price developments closely (following) the BSP’s price stability mandate,” it added.
BSP Governor Felipe Medalla said inflation in the Philippines would likely decline to below four percent by the third quarter of this year.