THE ASIAN Development Bank (ADB) retained its 6.8% and 6.9% gross domestic product (GDP) forecasts for the Philippines for 2018 and 2019, respectively, in its Asian Development Outlook Supplement published on Thursday, July 19.
However, it raised inflation outlook to 4.3% this year from 4% earlier, and kept its 3.9% forecast for 2019.
Headline inflation in the Philippines reached 5.2% in June 2018, bringing the six-month average to 4.3% — above the central bank’s 2-4% target band — driven by high fuel and food prices.
“This outcome combines with expectedly high global oil prices, peso depreciation, and strong domestic demand to prompt this Supplement to revise the inflation forecast for 2018 to 4.3% from the ADO 2018 forecast of 4.0%. Higher excise taxes on fuel and some commodities as part of the Tax Reform for Acceleration and Inclusion Act, which took effect in January 2018, are contributing factors,” the report read.
“The impact of tax reform on inflation is expected to be transitory, however, and normalize in 2019. Also arguing for maintaining the inflation forecast for 2019 at 3.9% are upward adjustments to monetary policy rates anticipated in line with tightening monetary policy globally,” it added. — Elijah Joseph C. Tubayan