Inflation quickened to 8%

PHILIPPINES - In Brief 06 Dec 2022 by Romeo Bernardo

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The headline inflation rate rose to 8% in November, up from 7.7% in October. Price increases continued to show momentum with the month-on-month rate rising 0.9%, driven by both higher food prices, particularly vegetables, and services like public transport and restaurants. Core inflation similarly remained on the uptrend, rising from 5.9% in October to 6.5% last month. November’s inflation print, the highest since late 2008, coupled with an expected 50bp US Fed rate hike later this month, supports analysts’ view of a matching rate increase when the Monetary Board meets on December 15. Despite softening oil prices, manufacturers have yet to complete their planned staggered price increases to recover earlier increases in input costs. This, plus unclear policies to stabilize domestic food supplies and the tight electricity supply situation in Luzon, which has experienced several yellow alerts (meaning inadequate reserves) in past days, will continue to put pressure on domestic inflation. The BSP forecasts inflation to average 4.3% in 2023, within its target band of 2.5% to 4.5%. This compares with our latest forecast of 4.8%. Yesterday, the inter-agency Development Budget Coordination Committee (DBCC) revised down its 2023 GDP growth target citing external headwinds. From 6.5% to 8%, GDP is now expected to grow in the range of 6% to 7%, still rosy compared with our 5% forecast.