Philippines: inflation picks up pace – UOB

Julia Goh, Senior Economist at UOB Group, assesses the latest release of inflation figures in the Philippines.

Key Quotes

“Headline inflation rose at a faster-than-expected pace to 2.5% y/y in Dec (from 1.3% y/y in Nov), beating ours (2.1%) and market estimates (2.0%). This was largely due to the persistent rise in fresh food, fuel and electricity prices amid dissipating base effects. For the full year of 2019, inflation averaged 2.5% (2018: 5.2%), matching our projection but coming in a tad higher than Bangko ng Pilipinas’ (BSP) forecast of 2.4%.”

“Although the escalating US-Iran tensions have pushed Dubai crude oil prices near USD70/bbl level for the first time since end-May 2019, it is still pre-mature to factor this impact in our Philippines’ inflation outlook. We keep our 2020 inflation forecast at 3.0% (BSP’s forecast: 2.9%), with upside risks emanating from a planned hike in excise duties for tobacco and alcoholic beverages, petitions for electricity rates and transport fare adjustments, potential impact of recent weather disturbances and African Swine Fever outbreak on domestic food prices, as well as volatile global oil prices.”

“Despite the uptick in Dec inflation, we think overall inflation expectations remain well-anchored within the BSP’s target range of 2.0%-4.0% this year”.