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NEWS UPDATES 3 November 2009

Philippines: Central bank revises inflation forecast down

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Prices of Philippine goods and services are likely to fall further, the Bangko Sentral ng Pilipinas (BSP) – the country’s central bank - said, citing a survey it conducted in September among private economists and analysts, reported GMANews,tv, a local news portal.

Instead of rising 3.5 percent as indicated by a June poll, the latest survey indicated that the mean inflation forecast for the year was 3.2 percent, the central bank said.
Both figures fall within the BSP’s inflation rate expectations of anywhere between 2.5 to 4.5 percent.

Of the entities surveyed, Deutsche Bank AG issued the highest forecast at 3.4 percent for this year. This was followed by the Rizal Commercial and Banking Corp. (RCBC) at 3.2 to 3.4 percent.

Inflation expectations of Banco de Oro – one of the Philippines’ biggest lenders – reached 3.31 percent while Bank of America/Merrill Lynch and think tank IDEA all predict a 3.3 percent rise.

HSBC and Forecastweb both agreed that inflation will grow by 3.2 percent, ATR King Eng and ING Bank at 3.1 percent, and Standard Chartered and Metrobank at 3.0 percent.

The same survey indicated that inflation would rise to 2.5 percent in the third quarter this year and 3.8 percent in the first three months of 2010, the BSP said.

For 2010, the BSP said the average inflation forecast was relatively stable at 4.8 percent or unchanged from the forecasts made by analysts and economists last June.

Factors seen to ease effects on consumer prices include the slackening domestic economy as well as the stronger peso, economists polled said.

“Moderate economic growth is expected to limit demand pressures and may temper any upside risks to inflation in 2009. The strong peso is also seen to mitigate any price increases for the year," the BSP added.

But at the same time, damages wreaked by storm Ondoy and typhoon Pepeng – expected to hike domestic demand – as well as higher global oil prices may push inflation up further this year.

“Some economists noted supply side pressures coming from the impact of the recent calamities and the potential rebound in oil prices in the latter part of the year which could lead to higher inflation in 2009. Diminishing base effects would also have an inflationary impact," the central bank said.

In the meantime, the average inflation forecast for next year had a broader range, with IDEA providing the highest estimate at 7.3 percent and Standard Chartered the lowest at 3.3 percent.

Next year, Deutsche Bank AG sees six percent inflation, followed by RCBC at 4.5 percent to 6.0 percent, Forecastweb and HSBC at 4.8 percent.

Coming in fifth is Bank of America/Merrill Lynch at 4.7 percent, Metrobank at 4.3 percent, ING Bank at 4.3 percent, Banco de Oro at 4.25 percent, ATR Kim Eng at 4.2 percent.

The September survey of private economists indicates that inflation will remain “within the target ranges for 2009 and 2010," the central bank said.

For next year, the government expects commodity prices are seen to rise anywhere from 3.5 percent to 5.5 percent. 


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