Economists have for 2023 || ماہرین اقتصادیات نے 2023 کے لیے. ECONOMISTS IN THE PRIVATE SECTOR have reduced their inflation forecast for this year, with most anticipating the Bangkok Sentra ng Pilipino (BSP) to begin cutting policy rates by the fourth quarter of this year.
According to the results of the BSP’s May survey of private economists, researchers now expect average inflation in 2023 to be 5.8%, up from 6% in the April survey. This is slightly higher than the revised 5.5% full-year prediction from the BSP.
Mean inflation predictions for 2024 and 2025 were maintained at 3.6% and 3.5%, respectively. Analysts expect inflation to exceed the BSP’s target range of 2-4% as a result of supply shocks.
Economists have for 2023 || ماہرین اقتصادیات نے 2023 کے لیے. The BSP stated in its most recent Monetary Policy Report that “risks to the inflation outlook remain tilted to the upside due to elevated prices of goods and services brought about by increased demand for goods and services,” on by supply chain disruptions.”
In April, headline inflation eased to 6.6% from 7.6% in March, slowing for a third consecutive month. Inflation for the first four months of the year averaged 7.9%, up from 3.7% in the same period last year.
According to the BSP, these supply-side disruptions could be caused by geopolitical tensions like the Russia-Ukraine War, global trade restrictions, and meteorological changes like the El Nao phenomena.
As potential dangers to inflation, “some analysts also cited the continued recovery of private consumption given improved labor market conditions, as well as second-round effects, particularly higher utility and transportation costs,” it was stated.
In the first quarter, the Philippine economy grew by 6.4%, which was less than the 8% growth seen in the same time a year earlier. Household consumption, which makes up around three-fourths of the GDP, increased by 6.3% from January to March, which is a lower rate than the 10% from a year before.
The BSP stated that through 2024, the risks to the inflation forecast are still positive, “warranting continued readiness to resume monetary action if necessary.” As downside threats to inflation, observers have pointed to the impending US recession, China’s downturn, the normalization of global supply chains, and the effect of the BSP’s policy rate rises.
Since May of last year, the BSP has increased borrowing costs a total of 425 basis points (bps), pushing the main rate to 6.25%, the highest level in almost 16 years. The BSP opted to maintain rates steady on Thursday and indicated that they would probably stay that way into the third quarter.
The BSP stated that there is a “near certainty” or a 99.2% possibility that inflation will surpass the 2-4% goal range based on the probability distribution of the projections made by 19 out of 26 analysts. The possibility that average inflation will settle inside the target zone has dropped from 0.7% to a pitiful 0.8%.
The likelihood that inflation will fall within the target range for the following year increased from 68.8% to 75.5%.
The BSP reported that for 2025, there is a 70.6% possibility (up from 67.5%) that inflation will be contained well within the 2-4% objective.
Analysts predict that the BSP will begin reducing rates in the fourth quarter by 25-125 bps, up to 250 bps in 2024, and by 100 bps in 2025. The BSP’s survey of economists in the private sector this month had 26 replies. The survey was carried out between May 5 and May 11.
The BSP examines the individual inflation estimates of consumers, business executives, and economists working in the private sector. It also examines the justifications offered for each forecast.
If there are no additional inflation shocks, according to Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chance, the BSP may lower policy rates by 50 basis points in the fourth quarter of this year.
The first Fed rate decrease is expected in September due to weaker GDP, a sustained decline in core inflation, and moderate wage growth, according to Mr. Chance. It is risky to decrease policy rates quicker than the US Federal Reserve this year, according to BSP Governor Felipe M. Medulla, as it could result in the peso depreciating versus the dollar.
The central bank may maintain its benchmark interest rate at 6.25% for the remainder of the year, according to ANZ Research analyst Debtlike Sarkar.
As for the BSP, she said, “we believe that an improving FX (foreign exchange) outlook, as supported by strong international reserves and weakening import demand, as well as broadening growth challenges and softening inflation, have opened the door for the BSP to remain on hold for the remainder of 2023.”
According to the BSP’s Monetary Policy Report, this year’s GDP growth would be between 6 and 7 percent, which is the government’s aim.
The Philippine economy, however, “is projected to settle below the 6.5-8% target for 2024,” according to the BSP. This reflects both the impact of the BSP’s overall 75-bp rate rise in the first quarter of this year and the worse outlook for global growth. K. B. Ta-as an