Annual inflation at 14-year highs in the Philippines will likely ease to below 4 percent by the third quarter and then 2 percent by early next year, as aggressive tightening and supply-side intervention take root, its central bank governor said on Monday.
“We expect to be very successful in bringing down inflation,” Bangko Sentral ng Pilipinas Governor Felipe Medalla told an investment forum in Frankfurt.
Medalla said the country’s high inflation is fueled by supply shocks, so the government’s plan to speed up importation of certain commodities like onion and sugar, on top of tighter policy, should help tackle soaring prices.
Medalla has signaled further interest rates hikes at the central bank’s first two policy meetings this year to bring inflation back within a target range of 2 percent to 4 percent.
Businessman Joey Concepcion sees prices to start declining and inflation taming by the middle of the year as the costs of commodities begin to fall.
“I believe by the middle of this year, we will see prices at much lower levels. We will start to see inflation going down towards the end of year. This year is a good year. We see demand and growth coming back and things will start to improve,” said Concepcion at the Laging Handa public briefing yesterday.
He noted the positive impact in taming inflation of the actions taken by the United States, the Philippines and other countries to raise interest rates starting last year.
The high commodity prices, he said, were caused by the conflict between Russia and Ukraine which disrupted the supply chain.
While the conflict continues to affect the world economy, Concepcion said prices of oil and wheat have started to decline.
“Hopefully, sugar and all the rest (of the commodities) will follow,” he said.
However, corresponding adjustments at retail have yet to be reflected as manufacturers are still recovering from the high cost from last year, Concepcion said.
But he noted the Ukraine-Russia crisis “is still around and hopefully, it does not get worse and starts to temper down.”
“That is the only way we go back to normal situation,” said Concepcion said.Food prices have pushed the consumer price index last month up 8.1 percent from a year earlier, bringing full-year average inflation to 5.8 percent, outside the central bank’s comfort range.
The BSP, which raised its benchmark interest rate by a total of 350 basis points last year, will hold its first policy meeting of 2023 on February 16. Reuters, Irma Isip
