Filipino consumers should expect prices of basic goods and services to rise at a faster rate for this year due to continued tightness in the supply of key food items and the expected uptick in international oil prices as the global economy recovers from the pandemic, according to the central bank.
Bangko Sentral ng Pilipinas Deputy Governor Francisco Dakila Jr. said, however, that prices were expected to start normalizing toward the end of 2021 and the consumer price index for 2022 would even be lower than originally believed.
In an online briefing, the central bank official said the new developments—including the unexpected spike in prices last month—prompted the policymaking Monetary Board to raise its inflation forecast for this year to 4 percent from the previous average of 3.2 percent that was set during its December meeting.
For 2022, the seven-member group that sets the central bank’s interest rate policy set, approved an inflation forecast of 2.9 percent last December, but this was revised downward to 2.7 percent during last week’s meeting.
“This is indicative of the nature of the pressure on inflation that they all come from the supply side and, therefore, should be transitory in nature,” Dakila said.
He explained that the current upward price pressures being experienced by Filipino consumers were being caused mainly by three factors: food supply issues, especially for pork products due to the ongoing African swine fever outbreak; the uptrend in global oil prices, and the rising demand for goods and services that come with the gradual recovery in the world economy after last year’s contraction.
Dakila warned that the food price-induced spike in the January inflation rate was expected to “carry over into the inflation outlook for the next few months.”
“The other factor is the revision in the outlook for oil prices,” he said, explaining that the Dubai crude oil benchmark was originally forecast to average $47.57 a barrel this year, but has been raised by the Monetary Board last week to $54.65 given current developments.
For 2022, from the previous meeting’s assessment of $47.44 a barrel, the Monetary Board revised the outlook for Dubai crude to an average of $51.98.
“These are consistent with the data we’re seeing in oil futures markets and also consistent with [forecasts of] international energy agencies,” he said.
“We know that the driver behind the recovery of oil prices is that—as the global economy gains momentum, and as we are able to deal with the pandemic and as restrictions are relaxed more—there is going to be a recovery in demand,” Dakila said. INQ
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