By Luisa Maria Jacinta C. Jocson, Reporter
THE INTERNATIONAL Monetary Fund (IMF) said that upside risks to the outlook for Philippine headline inflation still persist.
“Risks to the inflation outlook have receded somewhat but remain tilted to the upside,” a representative of the IMF told BusinessWorld in an e-mail.
“Food prices remain vulnerable to hostile supply shocks, and rising geopolitical tensions and recurrent commodity price volatility also pose upside risks,” it added.
Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. earlier said that the balance of risks to the inflation outlook for next 12 months until 2026 has shifted to the upside.
That is primarily on account of expectations of upper electricity rates and minimum wages, he said.
Regional wage boards earlier this month approved a hike within the every day minimum wages of staff in Cagayan Valley, Central Luzon and Soccsksargen.
In July, the Regional Tripartite Wages and Productivity Board also approved a P35 minimum every day wage hike for staff within the National Capital Region.
Meanwhile, the IMF sees inflation settling at 3.3% this 12 months and three% in 2025.
The BSP expects inflation to average 3.1% this 12 months and speed up to three.2% next 12 months and three.4% in 2026.
The IMF said that “decisive monetary tightening and non-monetary measures” have helped tame food inflation within the Philippines.
“Lower commodity prices have helped heraldflation right down to throughout the BSP’s goal band,” it said.
Headline inflation eased to 1.9% in September from 3.3% in August. The September print was also the slowest in over 4 years or because the 1.6% print in May 2020.
Food inflation slowed to 1.4% from 4.2% a month ago. This as rice inflation sharply slowed to 5.7% in September from 14.7% in August and 17.9% last 12 months.
“The BSP reduced its policy rate by 25 basis points (bps) in each its August and October meetings this 12 months, consistent with inflation and inflation expectations returning towards the goal,” the IMF said.
Because it began its easing cycle in August, the Monetary Board has reduced policy rates by 50 bps, bringing the important thing rate to six%.
Mr. Remolona earlier said the central bank could deliver one other 25-bp rate cut on the last policy-setting review on Dec. 19.
CURRENT ACCOUNT
Meanwhile, the IMF sees the country’s current account deficit further easing within the near term.
“The narrowing of the present account deficit in 2024 and 2025 can be supported by lower commodity prices, a gradual pickup in exports, supported by tourism returning towards pre‑pandemic levels and demand for the business process outsourcing sector holding up,” the IMF said.
The IMF expects the Philippines’ current account deficit to settle at 2.2% of gross domestic product (GDP) this 12 months and ease further to 1.8% in 2025 and 1.1% by 2029.
“Inward remittances are also expected to rise barely,” it added.
Within the January-August period, money remittances expanded by 2.9% to $22.22 billion from $21.58 billion a 12 months earlier. The BSP expects money remittances to grow by 3% this 12 months.
“Over the medium term, the present account is predicted to be supported by a continued gradual rise in exports,” the IMF said.
“From a saving‑investment perspective, the present account improvement is predicted to be driven by an increase in private and public savings, with the latter underpinned by the federal government’s plans to implement a gradual medium-term fiscal consolidation,” it added.
Within the first half of the 12 months, the country’s current account deficit stood at $7.1 billion, accounting for 3.2% of GDP.
The BSP expects the present account deficit to achieve $6.8 billion this 12 months or 1.5% of GDP.
