By Joann Santiago
MANILA, Dec. 11 (PNA) — Philippine monetary officials on Thursday slashed their inflation projection for 2014 to 2016 based on their assessment of a more manageable inflation environment in the next few years.
In a briefing after the rate-setting meet of the central bank’s policy-making Monetary Board (MB), Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo said their average inflation forecast for this year is now at 4.2 percent from 4.4 percent in last October’s rate setting meeting.
For 2015, the forecast was cut to three percent from 3.7 percent while the 2016 projection is now at 2.6 percent from 2.8 percent previously.
These are lower than the three to five percent target for this year and the two to four percent target for 2015-16.
Guinigundo explained that supply-side pressures are easing mainly because the Manila port congestion, which was the reason for the uptick in domestic inflation rate until the third quarter of the year, has somewhat been addressed.
He said rice imports, which have been increased to ensure that domestic supply would be augmented, also addressed concerns on rice supply in the country.
Continued drop in the price of oil in the international market, which has been posting record-lows, is another factor for the cut in the central bank’s inflation forecast.
Guinigundo, however, said that risks remain and these include the petition for utility rate hikes and the looming power crisis.
He said risks from higher utility prices have been considered in the inflation projection for the three-year period but the issue is the timing of these hikes.
The issue on the possible power shortage, particularly in the summer of 2015, is another concern but the central bank official said combined effort of the government and the public sector serves as a counter-balance.
This is partly because of the interruptible load program (ILP) of the Department of Energy (DOE), which was approved by the Energy Regulatory Commission (ERC) and being participated in by the Manila Electric Company (Meralco) and its large customers like malls.
Under the program, big customers of distribution utilities (DUs) like Meralco that own high-capacity generator sets will be allowed to use their own generator sets instead of relying on Meralco when supplies go down.
In turn, these big DU costumers will be paid by the DU based on the fuel they used to run the generators and on the depreciation of the equipment.
Similarly, Guinigundo said the Php 1 minimum fare rollback in jeepney fare in Metro Manila effective Friday is not included in the central bank’s baseline inflation forecast.
”We can expect that while there will be some marginal impact (because of the fare rollback) on December (2014) inflation for the entire year of 2014 will not show any perceptible effect from that adjustment,” he added.
As of end-November this year, average inflation in the country stood at 4.3 percent.
Last November alone, inflation rate posted a big drop to 3.7 percent from month-ago’s 4.3 percent due to slower inflation rate on several indices led by food and non-alcoholic beverages. (PNA)