The Bank of the Philippine Islands’ (BPI) lead economist Jun Neri said in a commentary on Tuesday that high January inflation data could keep February inflation above 8.5 percent, before decelerating in March.
Neri said that while inflation in February is “hopefully” the peak, the rate of its deceleration might be slower than originally anticipated and could affect both consumer confidence and overall growth.
Now that the ball is in the Banko Sentral ng Pilipinas’ (BSP) court, the lead economist stated that the central bank is expected to manage inflationary expectations more firmly, with at least a 25 bps hike in policy rate on the Feb.16 Monetary Board meeting.
“The result today is very humbling for everyone. Some degree of humility has to be taken and swallowed by everyone, realizing that this is very difficult to read. Just like in the US, very difficult to read what happens to wage increases here in our country. These post-lockdown price increases that we’re seeing are also very tough to analyze,” Neri added.
The lead economist also said that something must be done to slow down the pace of price increases so that consumers are able to manage.
He emphasized that the agriculture department should focus on food security and ensuring that the supply of these goods is available.
In relation to the GDP, Neri said that the high inflation seen in January and expected in the coming months will “clearly erode purchasing power” and that it is hard to imagine more than 6 percent growth this year.
In addition, the country might not benefit from global headwinds stemming from China’s re-opening and the US experiencing mild rather than deep recession if the country does not address its own problems, the economist said.
“BPI would like to lend to the consumers as much as we can but of course at some point it will be challenging to consumers if they experience a lot of debt problems resulting from the need to cope with these higher prices,” Neri added.
On Tuesday, the PSA announced January inflation at 8.7%, breaching both the consensus and BSP’s forecast.
