THE inflation environment is expected to remain “manageable” in the next four years, with the central bank taking into account the economy’s recovery trajectory after the pandemic.
“The DBCC (Development Budget Coordination Committee) in consultation with the BSP (Bangko Sentral ng Pilipinas), decided to retain the current inflation target range at 3% plus or minus one percentage point (ppt) for 2021 – 2022 and set the inflation target range at 3% plus or minus one ppt for 2023 – 2024,” the BSP said in a statement on Friday evening.
“Moreover, inflation expectations are expected to remain firmly anchored to the National Government’s target.”
The inflation rate from 2023 to 2024 will be dependent on the pace of economic recovery from the current coronavirus disease 2019 (COVID-19) crisis.
“The Philippine economy is expected to regain momentum as the health crisis is sufficiently addressed, while macroeconomic policies gain full traction in reviving the economy,” the BSP said.
Economic managers are pinning their hopes on a strong economic recovery starting 2021.
In its meeting earlier this month, the DBCC lowered its 2020 gross domestic product (GDP) outlook to 8.5-9.5% contraction this year (from 4.5-6.6% in July) but kept its growth forecast at 6.5% to 7.5% for 2021.
Moreover, the DBCC upwardly revised the growth estimate for 2022 to 8-10% (from 6.5-7.5%).
The economy remained in a recession after GDP shrank by 11.5% in the third quarter. Year to date, the GDP contracted by 10%.
“The COVID-19 pandemic could lead to structural changes in supply and demand factors that determine the level of inflation as well as affect the country’s future productive capacity,” the BSP said.
“This reinforces the important role of the inflation target as an important guidepost for the BSP in ensuring inflation remains low and stable, which will be conducive to long-term economic growth,” it added.
In its December policy meeting on Thursday, the Monetary Board raised its inflation forecast for 2020 and 2021 to 2.6% (from 2.5%) and 3.2% (from 2.7%), respectively. BSP Deputy Governor Francisco G. Dakila, Jr. said the outlook was updated due to the faster increase in food and global oil prices.
Meanwhile, the BSP maintained its 2022 inflation forecast at 2.9%.
In November, the consumer price index rose by 3.3%, quicker than the 2.5% in October and the 1.3% a year ago. The month’s print is also the fastest in 21 months or since the 3.8% logged in February 2019. — L.W.T. Noble