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

Key Quotes

“Headline inflation spiked up beyond the upper bound of BSP’s target range, at 4.2% y/y at the beginning of 2021 (Dec: 3.5%), exceeding our estimate (3.8%) and Bloomberg consensus (3.5%). January’s inflation reading also marked the highest rate in 2 years, which was primarily lifted by higher food, alcoholic beverages & tobacco, and transportation costs following the impact of bad weather, African Swine Fever (ASF) outbreak, scheduled increase in excise duties, and rising oil prices amid the continuation of containment measures to tame the spread of COVID-19 cases.”

“Going forward, we expect the nation’s inflation to persist its uptrend and stay above BSP’s target range in 1H21 before retreating below the 4.0% level in 2H21. This comes as most supplypushed factors are less likely to dissipate in the immediate term, prompting the government to introduce some short-term price relief measures including imposing price caps on pork and poultry products as well as allowing pork imports. We raise our 2021 full-year inflation forecast to 4.0% (from 3.0% previously; BSP forecast: 3.2%; 2019: 2.6%).”