Individuals browse through aisles as they shop for food items inside a supermarket in Quezon City, Jan. 16, 2023. — PHILIPPINE STAR/MIGUEL DE GUZMAN

PHILIPPINE INFLATION may start to plateau starting March as food supply is expected to improve due to the start of harvest season and lack of typhoons, National Economic and Development Authority (NEDA) Secretary Arsenio M. Balisacan said on Tuesday.

“We are hoping that we see a plateau already of inflation,” he said during a Palace briefing.

“It’s our hope, kasi February, March, that’s harvest season for farmers, and we did not have any major typhoons during the last few months… So we are expecting better data,” he added.

Inflation hit a fresh 14-year high of 8.7% in January, accelerating from 8.1% in December as food prices soared amid supply issues. January marked the 10th consecutive month inflation was above the BSP’s 2-4% target range.

ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said headline inflation will likely peak in February, barring any supply shocks.

“Based on my model, inflation should peak in February because base effects will start to kick in unless there’s a supply shock. Of course, if there’s a storm or whatever, but if there’s none, the peak will be in February,” Mr. Mapa said at an economic briefing on Tuesday.

According to Mr. Mapa, even though inflation might peak this month, commodity prices might go down slowly due to how widespread it has become.

“We’re right in that situation in where second-round effects are starting to really spread in the (consumer price index) basket,” he said, noting that 189 out of the 198 items in the January basket have above 4% inflation.

Mr. Mapa said inflation may return to the 2-4% target band only by December.

Meanwhile, First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P) said inflation is projected to average 8.1% in the first quarter.

“Consistent with our forecast that Q1 inflation will average 8.1%, the Monetary Board increased policy rates by 50 basis points (bps) to 6% in its Feb. 16 meeting to keep inflation expectations in check, and minimize second-round effects,” FMIC and UA&P said in their Market Call.

The BSP also upwardly revised its average inflation forecast to 6.1% this year from 4.5% previously.

FMIC and UA&P said inflation may slow if the government ramps up support for agriculture.

“The deceleration will continue but local agricultural production must improve quickly for it to ease faster, albeit likely in the second half of the year,” it said.

“Notably, Thai rice prices (5% broken) have risen by 21.7% year on year by January and threaten to upset expectedly milder food inflation in the second quarter.”

The Philippines buys around 90% of its rice imports from Vietnam, and the rest from Thailand.

As inflation remains elevated, FMIC and UA&P said it expects the Monetary Board to hike rates by another 25 bps at its March 23 meeting.

For ING’s Mr. Mapa, the BSP may deliver one or two more rate hikes in the first half but at a likely slower pace. He said he also expects a 25-bp hike at next month’s meeting.

After the Feb. 18 meeting, BSP Governor Felipe M. Medalla signaled another 25-bp to 50-bp rate hike at its next meeting. He also said inflation is seen to go back within target by November or December this year.

Since May 2022, the central bank has raised rates by a total of 400 bps to curb inflation.

Meanwhile, the Philippine economy may be “relatively unscathed” by a potential global recession this year, FMIC and UA&P said.

“Most recent economic data suggest that the Philippine economy may weather the global recession relatively unscathed,” it said, citing improvements in the labor market, infrastructure spending and manufacturing activity.

There are concerns of a global slowdown this year, with the International Monetary Fund (IMF) saying that global growth will slow to 2.9% this year from 3.4% in 2022.

The government is targeting 6-7% growth this year, slower than the 7.6% expansion in 2022.

While elevated inflation may hurt consumer spending, FMIC and UA&P said “high levels of employment, the personal income tax break and overseas Filipino worker (OFW) remittances would blunt much of the negativity.”

Data from the statistics agency showed the unemployment rate inched up to 4.3% in December from November’s 4.2%. However, it is still better than the 6.6% jobless rate in December 2021.

“Employment may ease in Q1 slightly but should recover as (the National Government) ramps up infrastructure spending with the early approval of its budget and the manufacturing sub-sector emitting positive signals in January 2023,” FMIC and UA&P said. — Luisa Maria Jacinta C. Jocson, Keisha B. Ta-asan and Kyle Aristophere T. Atienza