By Luisa Maria Jacinta C. Jocson, A reporter
INTERNATIONAL MONETARY FUND (IMF) said high risk in the opinion of the topic of inflation in the Philippines is still ongoing.
“Risks to inflation have decreased but are still on the upside,” said the IMF representative. BusinessWorld by email.
“Food prices remain vulnerable to supply shocks, and rising political and commodity price volatility also pose risks,” it added.
Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. previously said the balance of risks to the inflation outlook in the next year until 2026 it changed upwards.
This is mainly due to the expected increase in electricity prices and low wages, he said.
Regional wage boards earlier this month approved an increase in the minimum daily wages for workers in Cagayan Valley, Central Luzon and Soccsksargen.
In July, the Regional Wages and Productivity Board also approved a P35 daily wage increase for workers in the National Capital Region.
Meanwhile, the IMF seesfdown to 3.3% this year and 3% in 2025.
The BSP expects inflation to reach 3.1% this year and increase to 3.2% next year and 3.4% in 2026.
The IMF said “strong fiscal consolidation and non-fiscal measures” helped reduce food consumptionfin the Philippines.
“The low price of goods has brought in importsffalls within the BSP target band,” he said.
The subject is enteredfit fell to 1.9% in September from 3.3% in August. The September print was also slowest in four years or since printing 1.6% in May 2020.
Eating insidefthe figure fell to 1.4% from 4.2% last month. This is as the inflation of rice has come down significantly 5.7% in September from 14.7% in August and 17.9% last year.
“The BSP cut its policy rate by 25 basis points (bps) in both its August and October meetings this year, consistent with inflation and inflation expectations returning to target,” the IMF said.
Since starting its easing cycle in August, the Monetary Board has cut policy rates by 50 bps, bringing the key rate to 6%.
Mr. Remolona previously said the central bank could deliver another 25-bp rate cut at the last policy review on 19 December.
CURRENT ACCOUNT
Meanwhile, the IMF sees the country’s current account deficit narrowing in the near term.
“The reduction of the current account def2024 and 2025 will be supported by low commodity prices, a gradual pick-up in exports, supported by tourism returning to pre-pandemic levels and the need for continued business outsourcing,” the IMF said.
The IMF expects the Philippines’ current account deficit to reach 2.2% of gross domestic product (GDP) this year and decline to 1.8% in 2025 and 1.1% in 2029.
“The domestic revenue is also expected to increase slightly,” it added.
In the January-August period, remittances grew by 2.9% to $22.22 billion from $21.58 billion last year. The BSP expects remittances to grow by 3% this year.
“In the medium term, the current account is expected to be supported by moderate growth in exports,” the IMF said.
“From a savings-investment perspective, the current account development is expected to be fueled by an increase in private and public savings, and this is supported by the government’s plans to gradually implement medium-term savings. fiscal consolidation,” he added.
Of fthe first half of the year, the country’s current account deficit stood at $7.1 billion, accounting for 3.2% of GDP.
BSP expects current account defit reaches $6.8 billion this year or 1.5% of GDP.
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