World Bank expects PH inflation to settle within central bank target next year

Metro Manila (CNN Philippines, December 5) — The November inflation data came as “very good news” putting the central bank back on track to hitting its inflation target by next year, the World Bank said on Tuesday.

The rise in consumer prices further moderated to 4.1% in November, a level not seen since March 2022. That Is the second month in a row that inflation slowed, even as the eleven-month tally of 6.2% remains outside the 2%-to-4% target band of the Bangko Sentral ng Pilipinas (BSP).

Still, the World Bank estimates inflation will cap the year at 5.9%, before falling to 3.6% in 2024, within the central bank’s range.

"The inflation rate of 4.1% is very good news and we see that according to the press release that the drivers are both food inflation but also non-food inflation has fallen. It’s important that both are falling and are closer now to the central bank’s target zone," said World Bank senior economist Ralph Van Doorn, adding he expects inflation to reach the 2% to 4% zone next year.

Supporting that upbeat outlook are expectations of easing food price pressures and that BSP’s tighter monetary policy will be felt in the financial system.

However, Van Doorn said risks remain and not all are under the control of the Philippines.

“The weather disturbances, El Nino, could still lead to higher domestic food inflation," he noted. "And maybe the increase in fuel prices could lead to second-round effects domestically."

The World Bank has kept its Philippine growth forecast of 5.6% this year, unchanged from its October review. That’s slower than 2022’s 7.6% rate of expansion.

“We see that the fourth quarter always gets a big boost from the holidays and we expect that to be the same this year," said Van Doorn. "So our projection of 5.6% assumes that private or household consumption will continue to be boosting growth in the fourth quarter."

Tourism’s continued rebound, coupled with the consistent performance of the IT-BPO sector, will also support growth prospects.

The Washington-based lender put its 2024 growth estimate for the Philippine economy at 5.8%.

“We expect that growth will be led by private consumption as inflation is expected to be lower supported by remittances," Van Doorn said.

"We also expect that investments will pick up a little bit compared to this year, which could be the result of the investment reforms that have been approved and are being implemented which will start to have an effect on both private and public investments,” he added.