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UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting assess the latest inflation figures in the Philippines.

Key Quotes

“Headline inflation edged up for the fifth straight month to 4.7% y/y in Feb (Jan: +4.2% y/y), the highest rate since Dec 2018. The reading came in line with Bloomberg consensus (4.7%) and the central bank’s monthly inflation forecast (4.3%-5.1%), but lower than our estimate (5.0%). Again, costlier food, tobacco, fuel, and catering services were main factors driving headline inflation last month, following the impact of African Swine Fever (ASF) outbreak, COVID-19 pandemic, and elevated global oil prices.”

“We project headline inflation to trend higher to sub-5.0% over the next few months before coming off to below 4.0% in 2H21. This will eventually result in a full-year inflation rate of 4.0% in 2021 (BSP forecast: 4.0%; 2020: 2.6%). Volatile crude oil prices, stronger-than-expected economic recovery after an early roll-out of COVID-19 vaccines in the country, developments of new coronavirus variants, and weather conditions are wildcards for the inflation outlook.”

“At this juncture, core inflation continues to indicate tepid domestic demand, while the nation’s economic recovery remains fragile and requires persistent policy support.”