January 6, 2025 | 12:00am
But full-year average to settle within target
MANILA, Philippines — Inflation is expected to pick up in December as analysts point to rising prices of food, electricity and fuel, but full-year inflation is still seen to settle within the two to four percent target for the first time in two years.
UnionBank chief economist Ruben Carlo Asuncion said inflation likely rose to 2.6 percent in December, from 2.5 percent in November, the highest in four months or since the 3.3 percent in August.
“The slight uptick in December inflation may have come from seasonal demand largely from the broad food items, particularly Noche Buena food stuff, that would historically have cyclical upticks,” Asuncion said.
Despite the increase, Asuncion sees average inflation falling to 3.2 percent in 2024, matching the full-year projection of the Bangko Sentral ng Pilipinas (BSP). If realized, this would be much lower than the six percent average in 2023.
“Average inflation for 2024 is at the midpoint of the BSP’s inflation target and we expect 2025 inflation to be slower at three percent at this point. Overall, this may mean the continuation of the BSP easing cycle in 2025,” Asuncion said.
The Philippine Statistics Authority will release the December inflation data tomorrow, Jan. 7.
Jonathan Ravelas, senior adviser at professional service firm Reyes Tacandong & Co., said inflation is expected to inch up to 2.7 percent in December, but would be lower than the 3.9 percent a year ago.
“This rise was mainly due to higher costs for food, electricity and fuel. The increase in prices was influenced by a weaker currency and weather-related disruptions,” Ravelas said.
Sarah Tan, an economist at Moody’s Analytics, likewise said that inflation would accelerate to 2.7 percent in December, bringing full-year inflation to 3.2 percent.
Tan said the pickup from November would be driven by price pressures from food as crops were damaged when six tropical storms from late October through November caused widespread flooding.
“Lowland vegetables and rice were some of the hardest hit crops as the typhoons swept across key farming areas. The overall impact on food production will continue to show up in December’s inflation print,” she said.
Tan also noted that electricity prices in the Philippines likely picked up as Manila Electric Co. implemented a generation charge hike, while gasoline and petroleum costs also increased during the month.
“Through 2025, inflation will bump around the midpoint of the BSP’s two to four percent target range. This will support the continuation of monetary easing at a measured pace,” she added.
Reinielle Matt Erece, an economist at Oikonomia Advisory & Research Inc., also said inflation would settle at 2.7 percent in December, driven by higher demand for goods and services amid the holiday season and the peso’s depreciation against the dollar.
This would bring inflation to a full-year average of 3.2 percent in 2024, he said.
“This may be a positive sign for the central bank to remain with their monetary easing path for 2025. However, it may be important to monitor the US Federal Reserve’s own monetary policy to avoid capital flow shocks and extreme exchange rate movements with our own currency,” Erece said.
Miguel Chanco, chief economist for emerging Asia at Pantheon Macroeconomics, offered a slightly higher forecast of 2.9 percent for December.
“Food inflation continues to mean-revert upward,” he said. “This probably will be the last leg up for the time being, assuming no unexpected supply shocks, and we should see more softer prints for the rest of the year.”
Meanwhile, Metrobank chief economist Nicholas Mapa said inflation would remain unchanged at 2.5 percent in December. But stable inflation in the coming months would give the BSP room to continue easing in 2025.
The BSP delivered a total of 75 basis points of rate cuts in 2024 as it shifts towards a less restrictive monetary policy stance. This brought the key rate down to 5.75 percent from 6.5 percent previously.
The Monetary Board also decided to adjust the frequency of its policy meetings to six per year, starting in 2025, from the current seven meetings per year.
Be the first to comment