Inflation to decline below 4% next year

October 22, 2018

The country’s inflation is expected to fall below the 4-percent level by the second half of 2019 due to the expected normalization of oil prices after peaking this quarter, a leading bank's economist said.

Emilio Neri Jr., Vice President and lead economist at the Bank of the Philippine Islands (BPI), said oil prices are projected to fall from today’s USD70 a barrel to USD60 to USD65.

Neri said the country recorded an inflation rate he dubbed “temporary faster” this year, triggered by the 44-percent increase of average oil prices for the first nine months of the year.

“Practically, we had an oil price shock this year that happens only every 10 years,” he told the Philippine News Agency (PNA) Friday on the sidelines of Euromoney Philippines Investment Forum.

“Last time we saw it (oil price shock) was in 2008 and the same thing happened, even a higher inflation. So we are quite confident that next year it’s not gonna be here anymore,” he added.

The country’s inflation rate hit a nine-year high to 6.7 percent in September 2018 from 6.4 percent in the previous month, due mainly to higher food prices caused by supply disruptions following the onslaught of Typhoon Ompong.

Neri said inflation will increase probably close to 7 percent in October as oil prices went up through the month.

Economic managers of the Duterte administration revised their inflation forecast for 2018 to 4.8 to 5.2 percent from 4 to 4.5 percent, taking into account the impact of mostly external factors. For 2019, the assumption is 3 to 4 percent.