Inflation Predicted to Stay High

The inflation rate of the Philippines is predicted to stay elevated and average over 8.1% in Q1 of 2021, as stated by the First Metro Investment Corp. (FMIC) and the Capital Markets Research of the University of Asia and the Pacific (UA&P).

In UA&P and FMIC’s Market Call report, the headline inflation rate jumped to 8.7% last January due to utility and food costs.

“Headline inflation will likely slow down from these heights, but our projected average for Q1 (first quarter) remains at 8.1 percent,”  mentioned the report.

UA&P and FMIC both mentioned that for inflation rates to ease faster, the output of the local agriculture sector would need to advance at a quicker rate.

“Notably, Thai rice prices (five percent broken) have risen by 21.7 percent YoY (year-on-year) by January and threaten to upset expectedly milder food inflation in Q2 (second quarter),” said the two parties.

Meanwhile, the Bangko Sentral ng Pilipinas raised key policy rates by 50 basis points (bp) last week.

According to UA&P and FMIC, a 25-bps rate increase is expected to hit next month.

For National Economic and Development Authority Secretary Arsenio Balisacan, he mentioned that “We are hoping we’ll see a plateau of that inflation. Next month, we’ll see new data on inflation. We did not have major typhoons during the last few months. We are expecting better data there. But there are always surprises and it surprised me when I saw that number in January,”

Despite the high inflation, UA&P and FMIC have a positive outlook on the economy of the Philippines.

Source: Philstar