BSP: Inflation Expected To Reach 8.3%

Bangko Sentral ng Pilipinas (BSP) said inflation in the Philippines may have further accelerated in January due to increases in electricity and water rates, petroleum products, key food items, and an annual rise in “sin” taxes.

These factors overpowered other activities such as lowered prices of cooking gas or LPG and the appreciation of the Philippine peso against the US dollar.

The peso closed at 54.64:$1 on Jan. 31, which was less than the 55.755:$1 ratio on Dec. 31, 2022.

However, Fitch Solutions said the growth rate in the prices of goods and services in the Philippines is forecasted to decline from the 5.8% average in 2022 to 5.4% in 2023 and is expected to go down to 2.7% in December.

“The risk now is that inflation remains elevated at these levels for longer than anticipated, which will accelerate the erosion of household purchasing power,” Fitch Solutions said.

Currently, the BSP aims to maintain the annual average inflation within the range of 2-4% expecting to achieve it in 2024.

In the International Monetary Fund’s (IMF) Economic Outlook report, the IMF said that 2023 will see inflation peak globally.

“The rise in central bank rates to fight inflation and Russia’s war in Ukraine continue to weigh on economic activity,” the IMF said.

The IMF expects global inflation to decline from 8.8% to 6.6% in 2023 and 4.3% in 2024. The multilateral lender said a faster decrease in the inflation rate would boost demand in numerous economies.

However, inflation might be worse than the IMF’s forecast should external global factors such as a slow recovery from the reopening of China, the escalation of Russia’s invasion of Ukraine, and tightening policies that would increase debt distress.

“Financial markets could also suddenly reprice in response to adverse inflation news, while further geopolitical fragmentation could hamper economic progress,” the IMF said.

Source: Inquirer.net