Below 3.2% average in lation seen this year

The possibility of inflation averaging higher than monetary authorities’ projected 3.2 percent is less likely this year given the economic impact of the pandemic, a ranking Bangko Sentral ng Pilipinas (BSP) official said.

In a briefing streamed over the BSP’s Facebook page Thursday, BSP Deputy Governor Francisco Dakila Jr. said the balance of risks to inflation leans on the downside.

“That means when we look at all the different possibilities. It’s much more likely that you can have an average that is a little bit below 3.2 percent for the year rather than higher than 3.2 percent,” he said.

Downside risks to the rate of price increases this year include the dampening effects of the pandemic which impact economic activities.

Upside risks, on the other hand, include weather-related disturbances, which Dakila said “are really on the short-term.”

For 2022, the BSP’s average inflation forecast is 2.9 percent.

Both this and next year’s projected average inflation rate is within the government’s 2-4 percent target band until 2024.

Dakila said the trajectory of inflation points to a rate of above the midpoint of the target in most of this year.

He said the uptick of December 2020 inflation rate to 3.5 percent, from month-ago’s 3.3 percent, is still attributable to the impact of the heavy typhoons in the latter part of last year and the rise in the international oil prices, both of which are supply-side factors.

Amidst the acceleration of inflation rate in the last two months of last year, average inflation in 2020 stood at 2.6 percent, below the 2-4 percent target band.

“We see that the impact of these factors will be concentrated more on the first half of the year and perhaps continuing a little bit into the second half. But later on, inflation can drop to below the midpoint of the target towards the last half of the year. Again, being driven by, this time, base effects,” Dakila added.