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April 12, 2024

Economists maintain Philippine inflation outlook despite potential challenges

Despite anticipated upward price pressures and potential secondary shocks, economists foresee inflation remaining at 3.9% this year.

While the forecast for 2025 has been marginally adjusted upward to 3.5%, previous projections for 2024 and 2026 remain unchanged. The BSP’s risk-adjusted inflation forecast closely aligns with these figures.

Despite stable inflation expectations, potential risks loom, including supply-side challenges such as El NiƱo and geopolitical conflicts, which may lead to escalated prices for essential goods and services. Wage adjustments, electricity rates, and global economic conditions also contribute to the inflation outlook.

Although there is confidence that inflation will stay within the target range, analysts acknowledge the likelihood of fluctuations, with a majority predicting that the BSP will maintain its current policy stance until the latter half of 2024.

Downside risks include a potential decline in food and non-food inflation and subdued global demand, while upside risks involve escalating transport costs and commodity prices. The BSP’s commitment to securing rice supply and its cautious monetary policy approach aim to mitigate these risks.

However, the economy may face repercussions from cumulative rate increases implemented since May 2022, with indicators suggesting a possible moderation in economic activity in the near term.