Inflation could hit new high this year

MANILA, Philippines — The country’s inflation rate may exceed 3.4 percent this year due to the impact of higher oil prices as well as the wage hike in Metro Manila, according to the Bangko Sentral ng Pilipinas.

BSP Deputy Governor Diwa Guinigundo said authorities expect inflation to slightly exceed the 3.4 percent recorded in March and April this year.

“Now whether it will peak in the third or the fourth quarter, we don’t expect a very significant blip other than those that we hit earlier. If there is anything that will represent another high for the rest of the year that should not be very different from the high achieved earlier,” he said. 

Last July, the BSP believed inflation had already reached its peak at 3.4 percent in March and April and slowed down to 2.7 percent in May and June before inching up to 2.8 percent in July, and 3.1 percent in August.

Inflation averaged 3.1 percent in the first eight months, well within the two to four percent target set by the BSP.

“It is very difficult to say that, but the monthly path that we are seeing today is that, the third quarter and the fourth quarter I think will feel the impact of higher wages as well as the continuing growth story,” Guinigundo said.

The Philippines has booked 74 consecutive quarters of positive gross domestic product (GDP) growth since the first quarter of 1999. The GDP expansion inched up to 6.5 percent in the second quarter from 6.4 percent in the first quarter of the year. 

Economic managers pegged a GDP growth of 6.5 to 7.5 percent for this year and seven to eight percent for 2018.

Last Thursday, the BSP’s Monetary Board kept its inflation forecast at 3.2 percent for 2017 and 2018 but adjusted the 2019 projection to 3.2 instead of 3.1 percent.

“By the time we hit the first quarter of 2018 we are expecting some negative base effects but from the second quarter to the first semester of 2019 we see some positive base effects,” he said.

The path, he explained, could change depending on how the risk to inflation would fan out particularly with the implementation of the Comprehensive Tax Reform Program next year.