By Melissa Luz T. Lopez
Senior Reporter
THE International Monetary Fund (IMF) expects Philippine inflation to remain elevated until 2019, and is even expecting price increases to overshoot the central bank’s target this year.
“The inflation forecasts have been updated using the 2012 basket. They are 4.2% for 2018 and 3.8% for 2019,” IMF country representative Yongzheng Yang said via e-mail.
If realized, the IMF’s 2018 forecast will log higher than the 2-4% target band set by the Bangko Sentral ng Pilipinas (BSP), with hints that the pace will accelerate further compared to the four-month average at 4.1%.
The Philippine Statistics Authority announced in February that it will be shifting the base year for the monthly inflation report to 2012. The agency said rebasing is necessary in order to reflect “economic, social and technological changes” that likely influenced changes in consumption patterns and priorities.
Prices of widely-used goods hit a fresh peak in April at 4.5% under the 2012 base year, coming from March’s 4.3% and 3.2% a year ago. This pushed the year-to-date tally beyond the 2-4% target range of the central bank.
As of the BSP’s March 22 policy review, inflation is seen averaging 3.9% for the entire 2018. By next year, price increases are expected to clock in at 3%.
During its annual health check on the economy in 2017, the IMF said inflation could go as high as 3.8% this 2018 and 3.6% next year based on 2006 prices if the Philippines is able to carry out its “reform-and-spend” agenda. This assumes that tax reform, a “gradual” increase in infrastructure investments, as well as structural reforms will cause some price pressures.
The multilateral lender in November said inflation is expected to “stay near the center” of the BSP’s target range for the full year, but noted that the monetary authority should stand ready to tighten rates to curb signs of overheating.
Market players are now pricing in a rate hike from the central come Thursday as inflation maintained its ascent for the fourth straight month. BSP Governor Nestor A. Espenilla, Jr. last week acknowledged that inflation may have “spread somewhat” to cover more goods, against the previous observation that price increases are limited to oil, alcoholic drinks and cigarettes due to the implementation of the tax reform law.
The IMF also expects Philippine gross domestic product to expand by 6.7% this year to match the growth pace last year, before accelerating to 6.8% in 2019.
The IMF forecast compares to the 6.8% growth estimate given by the Asian Development Bank and 6.7% from the World Bank. However, these forecasts fall short of the 7-8% annual growth goal set by the Duterte administration.

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