INFLATION SEEN EASING TO 3.2% IN FIRST QUARTER

INFLATION could ease to 3.2 percent in the first quarter of this year, private sector economists said in a report on Tuesday, mainly due to base effects.

In their joint Market Call report for January, First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P) said that consumer price growth would likely stay within the Bangko Sentral ng Pilipinas’ (BSP) 2.0- to 4.0-percent target.

Even lower inflation could be recorded if food prices stay subdued, they added.

“Various methodologies do show a definitive easing in inflation,” the economists said.

“Food prices, except for rice, have stabilized or declined, while crude oil prices have quickly headed south after every major event that got traders nervous.”

The economists retained their fullyear inflation forecast of 3.8 percent despite the threat of higher rice prices.

Inflation hit a 14-year high of 8.7 percent in January last year but returned to target in December at 3.9 percent.

The full-year average, however, still breached the target at 6.0 percent, prompting the Philippine central bank to issue an open letter detailing why it happened and what measures were being taken to temper price growth.

BSP Governor Eli Remolona Jr., in the letter addressed to President Ferdinand Marcos Jr., said rice prices were particularly to blame, having surged due to higher global demand and tight supply.

He said inflation could fall within target in the first quarter this year but again top 4.0 percent in the next three months before easing for the rest of 2024.

With the slower inflation coupled with sustained infrastructure spending and robust job numbers, the FMIC and UA&P economists said that this should drive economic growth this year.

They upheld a 6.0-percent gross domestic product (GDP) growth forecast for 2024, which is below the government’s target of 6.5 to 7.5 percent.

Faster economic growth and lower interest rates throughout the year should also reduce the debt-to-GDP ratio to 59 percent.

The government’s infrastructure spending was projected to stay at 5.0 percent of GDP.

“The peso will likely trade sideways in Q1-2024 (first quarter of 2024) but resume its depreciation trend thereafter as the trade deficits remain above $4.0 billion per month, and the BSP will likely start rebuilding its gross international reserves,” the economists said.