The approaching Christmas festivities and the expected seasonal increase in remittances indicate that economic activity will tick higher in November and December, which may fuel inflationary pressures.
ANZ Research on Monday 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. 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 percent in October, from 6.9 percent in September and 4 percent 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 percent in October from the revised 5 percent in September, Business World quoted ANZ Research.
For the 10-month period, inflation averaged 5.4 percent, still lower than the BSP’s 5.6 percent full-year forecast.
Bangko Sentral ng Pilipinas (BSP) Governor Felipe M. Medalla previously projected inflation to 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 last November to Bloomberg TV.
After the higher-than-expected inflation print in October, Pantheon Macroeconomics revised its average inflation forecast to 5.7 percent (from the original 5.4 percent) this year, and to 3.6 percent (from 3 percent 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 percent 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 percent target range by the second half of 2023.
The BSP projects inflation to average 4.1 percent next year before easing to 3 percent in 2024.
The government has allocated P206.5 billion for cash transfers and subsidy programs for 2023 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 on Monday.
Of this amount, the Department of Social Welfare and Development (DSWD) will get 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), 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,” Pangandaman said.
The 2023 budget 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,” said economist Michael Ricarfort of Rizal Commercial Banking Corp.