Analysts see inflation easing below 3% in May
Credit to Author: ANNA LEAH E. GONZALES| Date: Sun, 02 Jun 2019 16:14:05 +0000
INFLATION likely eased below 3 percent last month because of lower food prices, according to analysts polled by The Manila Times.
Forecasts on the rate of the increase in the prices of goods and services for the month ranged from 2.7 percent to 3.1 percent with a 2.9 percent average, down from the 3.0 percent posted in April and 4.6 percent in May last year.
The Bangko Sentral ng Pilipinas (BSP) earlier projected inflation to ease to as low as 2.8 percent or pick up to 3.6 percent, while London-based economic research firm Capital Economics saw it settling at 2.5 percent.
The Philippine Statistics Authority (PSA) is set to release official May inflation data on June 5.
HSBC Global Research offered the highest inflation projection of 3.1 percent, attributing it to higher prices of oil and the continued increase in vegetable and fruit prices.
“All things considered, however, inflationary pressures remain benign and headline prices are likely to hover around the midpoint of the Bangko Sentral ng Pilipinas’ 2-4 percent target,” HSBC said in a report.
It expects full-year inflation to average 3.1 percent, which it said would allow the BSP to further loosen monetary policy in the fourth quarter.
“We believe the BSP has scope for another 100 basis points of RRR (reserve requirement ratio) cuts and a 25-bps policy rate cut by yearend,” HSBC said.
Analysts from the Rizal Commercial Banking Corp. (RCBC) and Philstocks Financial Inc. both forecast inflation to remain steady at 3 percent.
According to Philstocks research associate Japhet Louis Tantiango, inflation could fall within 2.8 to 3.2 percent, with a 3.0 percent average, due to upside pressures that include base effects, elevated oil prices and the depreciated peso.
“Downward pressures include lower rice prices and electricity rates,” Tantiangco said.
Michael Ricafort, head of RCBC’s economics and industry research division, explained that inflation could remain steady at 3 percent, but may ease further to 2-percent levels in the remaining months of 2019 due to reduced food and global oil prices.
“Food prices, especially [of] rice, have continued to go down in recent months amid the harvest season and partly due to the government’s non-monetary measures since the latter part of 2018 to increase food/rice supply, even before the full effects of the Rice Tariffication Law (Republic Act 11203) have taken place,” he said.
“Prices of most agricultural prices, such as vegetables and other produce, have remained relatively lower, compared to [those in] recent months amid the harvest season and improved local supply conditions,” he added.
According to Ricafort, global crude oil prices also went down by more than $13 since late April.
The RCBC analyst also said the relatively stronger and stable peso exchange rate could also pull down inflation, as a stronger Philippine currency “helps lower prices of imports, such as oil, rice, capital goods, other consumer goods.”
“The government’s non-monetary measures to better manage inflation since the latter part of 2018 has been effective in lowering the price of food items, effectively offsetting any adverse effects of the mild El Niño drought on prices of agricultural products,” he added.
Analysts from Moody’s Analytics and Union Bank of the Philippines, meanwhile, both see inflation hitting 2.9 percent.
“Subdued rice prices are an important contributor to the deceleration,” Moody’s Analytics Economist Katrina Ell said.
UnionBank chief economist Carlo Asuncion also believed the lower inflation could be due to the lower prices of commodities.
“The slowdown [may be] slower, but it is still expected to ease further as price levels continue to ease, as well,” he said.
Eagle Equities Inc. head of research Christopher Mangun, offered the lowest forecast of 2.7 percent.
“The surge in rice imports have drastically lowered prices, and oil prices also came down toward the end of May,” Mangun said.
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