BSP sees inflation further easing by year-end

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) said inflation would ease further toward the end of the year as food prices continue to soften and as the impact of recent monetary prices adjustments kick in.

BSP Governor Benjamin Diokno said, in a speech delivered by Deputy Governor Francisco Dakila during the second quarter 2019 Inflation Report press briefing, the latest baseline inflation forecasts continue to indicate a within-target trajectory for this year and next year.

Diokno said the three percent headline inflation fell at the midpoint of the national government’s target of two to four percent in the second quarter from 3.8 percent in the first quarter.

“This was due to improved domestic food supply conditions which significantly reduced food inflation. In particular, rice prices declined with the ongoing harvest season and the continued arrival of imports,” Diokno said.

Diokno said lower food prices offset the impact of higher fuel prices in the second quarter due to tighter global oil supply conditions.

“Nonetheless, lower worldwide demand for oil, amid escalating trade tensions between the US and China, was seen as a downside influence on the path of oil prices going forward,” the BSP chief said.

Estimated futures prices of Dubai crude oil as of end-June showed a lower path for 2019 to 2023 compared to the estimates in the previous quarter.

Inflation averaged 3.4 percent in the first half after easing to a 22-month low of 2.7 percent in June from 3.2 percent in May, while the country’s gross domestic product (GDP) growth slowed to a four-year low of 5.6 percent in the first quarter from 6.3 percent in the fourth quarter.

“Nevertheless, we expect growth to remain robust in the coming months,” Diokno said.

The BSP chief also cited the steady growth in domestic liquidity and bank lending, reflecting robust demand from key productive sector to support the growing economy.

Dakila said the BSP has lowered its inflation forecasts to 2.7 percent for 2019 and to three percent for 2020.

“There are several data points that do have a big impact for the assessment of the inflation outlook including what would be happening to the July inflation,” Dakila said.