Filipinos will continue to suffer under the weight of high commodity prices, especially if no measures to address supply-side issues are undertaken to cool down inflation, according to local economists. Know more:
FILIPINOS will continue to suffer under the weight of high commodity prices, especially if no measures to address supply-side issues are undertaken to cool down inflation, according to local economists.
Efforts to address supply-side constraints, Lanzona said, should include government investments in developing a productivity program to increase exports and domestic products. The BSP efforts to increase interest rates to temper demand may only offer consumers “temporary reprieve” from high prices as supply-side constraints have not been addressed.
“Inflation is expected to be high because commodities are elevated and have not been addressed,” Ravelas said in a phone interview. “With core inflation at 6.5 percent, its also possible to see it hit 7 to 7.5 percent.” In its latest commentary, the Bank of the Philippine Islands has also adjusted its inflation expectations to 5.8 percent in 2022; 4.3 percent in 2023; and 3.1 percent in 2024.
BPI still expects the BSP to follow the US Federal Reserve but maintain a 100 to 200 basis point differential with US interest rates. Should this happen, BPI said the BSP’s rates may go down to around 4 percent toward end-2023. Other risks: higher food prices from further domestic weather-related disturbances and supply disruptions in key food commodities such as sugar and meat, as well as pending petitions for transport fare hikes.Reside said one thing that could cool down inflation is the expected slowdown in the increase in oil prices as well as the expected recession overseas.
“The impact of a weaker-than-expected global economic recovery is the primary downside risk to the outlook,” BSP said in a statement on Tuesday.
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