Inflation forecast to settle at midpoint of 3-5% target

MANILA, Philippines - Economists forecast inflation this year to settle near the midpoint of the Bangko Sentral ng Pilipinas’ (BSP) three to five percent target range.

“Inflation expectations--reflected in forecast surveys of private sector economists by the BSP and by Consensus Economics –continue to support the within-target inflation outlook,” the central bank said in a report.

According to its survey of private economists done in November last year, inflation is expected to average at 3.8 percent this year, accelerating from the three percent recorded in 2013.

The forecast is also an upward revision from the 3.5 percent projection done in October last year, the central bank noted.

Meanwhile, the Consensus Economics Survey in November showed a mean inflation forecast of 3.6 percent for 2014.

Consensus Economics is an international survey organization that polls more than 700 economists on macroeconomic indicators such as gross domestic product growth, inflation, interest rates and exchange rates.

Despite being faster than the three percent average recorded in 2013, both forecasts are below the central bank’s projection announced last December.

The BSP expects inflation to average 4.5 percent this year, near the upper end of its target range largely because of higher power rates.

The central bank earlier said it has also factored in the impact of recent Typhoons Yolanda and Santi to its forecast as the natural calamities may have created supply shocks that resulted in spikes in food prices.

“The risks to future inflation remain slightly skewed to the upside,” the BSP said.

“Potential increases in food prices and utility rates due to some supply-related concerns alongside the likelihood of stronger-than-anticipated liquidity growth could result in higher inflation than current forecasts suggest,” the central bank continued.