ANZ raises PHL 2024 inf lation forecast
PHILIPPINE headline inflation will likely average 3.8% in 2024, with a risk of exceeding the central bank’s 2-4% target this year, according to ANZ Research.
“The Philippines is the only economy where inflation risks overshooting the upper end of the official target range of 2-4%,” it said in its quarterly research report released on Tuesday.
ANZ’s latest forecast is higher than the 3.5% it issued previously. It is also higher than the Bangko Sentral ng Pilipinas’ (BSP) 3.6% full-year forecast.
“We estimate the monthly momentum will need to halve if annual inflation is to remain in the official target range. In part, this inflation problem is due to negligible policy intervention in the food and energy markets,” ANZ said.
“The monthly change in headline inflation averaged 0.6% in January and February. If this momentum is sustained, annual inflation will rise above 4% from the next quarter,” it added.
Inflation accelerated to 3.4% in February, the first time it accelerated in five months.
BSP Governor Eli M. Remolona, Jr. and Finance Secretary Ralph G. Recto both expect inflation to pick up to 3.9% in March. If realized, this would mark the second straight month of a pickup in inflation.
March inflation data will be released on April 5.
In an earlier report dated March 22, ANZ said it sees Philippine inflation climbing further in the coming months as underlying inflationary pressures remain elevated.
“Base effects will push up inflation in the coming months. While rice and fuel prices have started to stabilize, the percentage point contributions from the food and transport components are set to rise in Q2 2024 even if price indices remain flat at the current levels,” according to the report.
“If above-trend sequential gains persist, core inflation will breach 4% again towards the end of the year. The latest available data on other indicators such as non-agriculture wage growth, consumer credit growth and year-ahead inflation expectations have remained on an uptrend. Minimum wage hikes are another watchpoint,” it added.
Meanwhile, ANZ said it expects the BSP to begin its policy easing cycle this year.
“On the one hand, the bar to easing is now lower in more economies, and we are expecting interest rate cuts to commence in Thailand, India and the Philippines in 2024, in addition to our previous call for China, South Korea and Indonesia,” it said.
“On the other hand, our analysis suggest Asian central banks could be patient and wait for the US Fed to lead the global rate cutting cycle without hurting their economic growth recovery,” it added.
The Monetary Board kept its benchmark rate steady at a near 17year high of 6.5% for a third straight meeting in February. From May 2022 to October 2023, the BSP has raised borrowing costs by 450 basis points.