Economic managers are expecting a faster rise in consumer prices with inflation quickening to a range of 3.7 to 4.7 percent this year, following the uptick in the price of food and energy as a result of ongoing geopolitical tensions from the Russia-Ukraine conflict and disrupted supply chains.
The latest assumption is within and slightly above the two to four percent target set by the Bangko Sentral ng Pilipinas (BSP) for this year.
The central bank’s Monetary Board raised interest rates by 25 basis points last May 19, bringing the benchmark policy rate to 2.25 percent from an all-time low of two percent.
This was the first time the BSP raised interest rates in more than three years or since November 2018 after slashing key policy rates by 275 basis points from 4.75 percent.
The central bank also raised its inflation forecasts to 4.6 instead of 4.3 percent for this year and to 3.9 instead of 3.6 percent for next year.
Nevertheless, the DBCC maintained the inflation rate assumption at two to four percent for 2023 to 2025, consistent with the latest forecasts of other agencies and its deceleration over the medium-term.
The Development Budget Coordination Committee (DBCC) also raised the assumption for the price of Dubai crude oil per barrel for this year was increased to $90 to $110 per barrel instead of $60 to $80 per barrel considering potential supply disruptions caused by the Russia-Ukraine conflict.
Nonetheless, this is expected to decrease to $80 to $100 per barrel in 2023 and $70 to $90 per barrel in 2024 to 2025 as oil supply is expected to catch up over the medium term.