1 month ago
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With rice prices on the decline, domestic inflation would ease further this year, according to the think tank Economist Intelligence Unit (EIU).
In a Feb. 5 report, EIU regional director for Asia Alex Holmes projected headline inflation in the Philippines to average 2.5 percent this year, lower than last year's 3.2 percent.
"EIU expects inflation to decelerate slightly further over the coming months. The main reason is that rice prices, which account for about eight percent of the entire CPI [consumer price index] basket, will stay on a downward trajectory after falling by 2.4 percent year-on-year in January," Holmes explained.
"Global rice prices have been moderating since the lifting of India’s export ban last year, but this has only partially flowed through to the Philippines. In response, the government announced emergency measures to release government stocks and target price gougers, which will help to further bring down prices," he added.
As for other food items, Holmes said price pressures are expected to moderate as supply recovers following disruptions caused by a string of strong typhoons that battered the country towards the end of last year.
"Stable global commodity prices will also help to keep non-food inflation in check, mainly through keeping transport and utilities prices at bay, both of which are large components of the CPI," he said.
Benchmark oil prices, for instance, are seen dropping to an average of $75 per barrel in 2025 from $81 a barrel last year, according to Holmes.
As such, he forecasted that the Bangko Sentral ng Pilipinas (BSP) will keep the key interest rate steady at 5.75 percent when it decides on its monetary policy stance on Thursday, Feb. 13. "We expect the central bank to pause at its next meeting... to take time to assess after three consecutive cuts; however, there is a moderately high chance (about 25 percent) of another cut."
But Holmes cautioned about possible inflationary impacts from the prolonged wet season to be brought about by La Niña, as well as a weaker Philippine peso.
"Although the peso has held up relatively well in recent months amid a strong global dollar environment, the impact of any impending tariffs by the US President, Donald Trump, on Asia could bring another round of depreciatory pressures," he warned.
