INFLATION in the coming quarters could ease further due to the downside risks from the impact of the coronavirus disease 2019 (COVID-19) on oil prices and slower global growth, according to the Bangko Sentral ng Pilipinas (BSP).

“We are closely monitoring the developments in both domestic and global front and so far there are indications that the inflation outlook has shifted to the downside,” BSP Assistant Governor Iluminada T. Sicat said in an online briefing on Friday.

Given the slowdown caused by the pandemic as well as the lockdown in Luzon and other areas, headline inflation could end below the central bank’s target band before a pickup in 2021 on the back of a possible economic recovery, the central bank said.

“We could see inflation decelerating below the two to four percent range target in the third quarter of this year and also in the first quarter of 2021. Then after which, by the second quarter of next year, we see inflation gradually picking up towards the target,” BSP Monetary Policy Sub-sector Officer-In-Charge Dennis D. Lapid said.

In a pre-recorded address, BSP Governor Benjamin E. Diokno said inflation in the first three months of the year averaged at 2.7%, well within the central bank’s target.

Headline inflation averaged 2.5% in 2019, which was within the central bank’s target band.

For the next months, global oil prices are expected to affect the BSP’s inflation outlook, according to Ms. Sicat.

She said oil prices, particularly that of Dubai crude oil, continue to go down despite agreements from authorities to cut production amid falling demand.

“The global crude oil prices were assumed to average $31.56 per barrel in 2020 and $29.22 per barrel for 2021. And comparing these with our earlier assumption, these prices are now $10.8 per barrel lower for 2020 and [lower by] $14.93 per barrel in 2021,” she said.

Another factor for their latest inflation outlook is dimmer prospects for the world economy due to the impact of COVID-19. Ms. Sicat cited the projection of the International Monetary Fund, which sees a contraction of three percent in the global economy this year, which, if realized, would be worse than the 1% contraction seen in the aftermath of the global financial crisis.

A third driver is the decline in non-oil prices, like food and mineral costs, the official said.

Meanwhile, Mr. Lapid said an extension of the lockdown could also lead to the further disruption of economic activities, which may also be a downside to inflation.

On the other hand, Mr. Lapid said upsides stem from factors related to food prices.

“These have to do with things like increase or higher import prices for rice, because of the weather disruption in the region because of dry conditions in major rice-producing countries in ASEAN where we import from,” he said.

Mr. Lapid also cited the African Swine Fever’s impact on meat prices as another factor that may stoke inflation.

“Potential production disruption and logistical bottlenecks or shortages and temporary shortages in supply could [also] affect our domestic food prices,” he added. — L.W.T. Noble