Standard Chartered Bank cuts Philippines' inflation forecast through 2015
MANILA
- Standard Chartered Bank (SCB) revised downwards its inflation
forecast for the Philippines in the next three years amid the country’s
progress towards rice self-sufficiency.
In
a report, SCB said inflation could average 2.9 percent this year, lower
than the previous estimate of 3.1 percent. For 2014 and 2015, price
increases could average 3.9 percent and 3.5 percent, respectively, also
down from the earlier forecast of four percent.
“Our
forecasts indicate that inflation will remain within Bangko Sentral ng
Pilipinas’ (BSP) inflation target bands of 3 to 5 percent in 2013 and
2014 and 2 to 4 percent in 2015,” SCB said.
“Our
dovish inflation view is supported by the progress made in food
security in the Philippines. Other important inflation drivers, housing
and energy, are likely to remain subdued over the next few quarters,”
the British bank said.
Food
inflation has been the primary driver of headline inflation for the
past five years, accounting for 36.3 percent of the consumer price index
(CPI).
Food
inflation is expected to bottom out next year owing to base effects,
but to remain close to headline inflation levels, SCB said.
Benign food inflation is likely to ensure that headline inflation remains a secondary concern for policy makers, the bank said.
“Our models show that the Philippines has become more resilient to food price movements,” SCB said.
Among
the sub-components of food inflation, rice inflation is the key driver,
accounting for the biggest share at 8.9 percent, higher than those of
meat at seven percent, fish at 5.8 percent, dairy at 3.3 percent and
vegetables at 3.2 percent.
In
addition, rice prices are less seasonal than those of vegetables and
more volatile than of meat. However, rice inflation has been only a
marginal contributor to food inflation in the past two years, SCB said,
adding that fish has become the largest contributor in percentage point
terms.
“In
our view, fish prices represent the greatest upside risk to food
inflation at present. Fish inflation has increased in recent years,
accounting for the largest proportion of food inflation. In the short
term, a huge diesel spill in Manila Bay in August threatens to keep fish
prices high,” the bank said.
SCB
said the targets set by the Department of Agriculture are having an
impact. The Philippines Development Plan targets include achieving 100
percent rice self-sufficiency by 2013, up from 84.7 percent in
2004-2010.