EconomyEditor's PickInflation seen to peak in last 2 months

November 7, 2022
A woman buys fresh vegetables at the Marikina Public Market. — PHILIPPINE STAR/ WALTER BOLLOZOS

HEADLINE INFLATION is likely to peak in the last two months of 2022 as holiday demand and seasonal inflows of remittances may fuel inflationary pressures, ANZ Research said on Monday.

In a report, ANZ Research said the near-term inflation outlook remains challenging, even as global oil prices are now below the $100-per-barrel level.

“The steady rise in core inflation resonates with a buoyant domestic demand. The approaching festivities and the expected seasonal increase in remittances likely indicate that economic activity will tick higher in November and December,” ANZ Research said.

“It is therefore possible that headline inflation will reach its peak in either November or December before showing signs of moderation,” it added.

Inflation accelerated to 7.7% in October, from 6.9% in September and 4% in October 2021. The October print was the fastest pace in almost 14 years. Core inflation, which excludes food and fuel volatile prices, quickened to 5.9% in October from the revised 5% in September.

For the 10-month period, inflation averaged 5.4%, still lower than the BSP’s 5.6% full-year forecast.

Bangko Sentral ng Pilipinas (BSP) Governor Felipe M. Medalla earlier said inflation will peak before the end of the year. “Of course, anything can happen but our best guess that it will peak either this month or the last month of the year,” he said in a Nov. 4 interview with Bloomberg TV.

After the higher-than-expected inflation print in October, Pantheon Macroeconomics revised its average inflation forecast to 5.7% (from 5.4% previously) this year, and to 3.6% (from 3% previously) for 2023.

“Nevertheless, our core view remains appropriate, in that the headline rate should peak before the end of this year, before sliding persistently throughout 2023, returning to the BSP’s 2-4% target range by the middle of the year, at the earliest,” Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics, said in a separate report.

ANZ Research also said it expects inflation to return to the BSP’s 2-4% target range by the second half of 2023.

The BSP projects inflation to average 4.1% next year before easing to 3% in 2024.

Meanwhile, the government has allocated around P206.5 billion for cash transfers and subsidy programs under next year’s proposed national budget to help ease the impact of rising inflation on most vulnerable Filipinos.

“We feel and understand the plight of our countrymen as we face the unfortunate impact of the inflation due to several factors that some are beyond our control,” Budget Secretary Amenah F. Pangandaman said in a statement on Monday.

Of the P206.5 billion, the Department of Social Welfare and Development (DSWD) will receive P165.4 billion for its social assistance programs.

The Department of Health will receive P22.39 billion for financial assistance for indigent Filipinos, while the Department of Labor and Employment (DoLE) will be provided with P14.9 billion for a program that helps disadvantaged and displaced workers.

The Department of Transportation (DoTr) will get a P2.5-billion budget for fuel subsidies for public transport drivers, who are most affected by volatile pump prices. The Department of Agriculture (DA) will get P1 billion to provide fuel subsidies for corn farmers and fisherfolk. 

“We will continue prioritizing the implementation of existing programs geared to provide targeted subsidies and assistance to the most vulnerable sectors and we are hopeful that these interventions would effectively balance our need to sustain our growth momentum while cushioning the impact of global inflation,” Ms. Pangandaman said.

Next year’s budget also includes funding for the Pantawid Pamilyang Pilipino Program (P115.6 billion), pension for indigent senior citizens (P25.3 billion), and sustainable livelihood program (P4.4 billion).

An economist said the planned subsidy programs are a “prudent and pragmatic” solution to help the poorest of the poor cope with rising prices.

“Instead of giving subsidies or reduction of taxes to everyone, given the limited funds of the government after incurring large debts since the pandemic started, that should be (addressed) in the coming years through tax reform,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a text message. — Keisha B. Ta-asan and Luisa Maria Jacinta C. Jocson

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