Gov’t Expects Inflation Rate to Drop Below 2% by 2024

Inflation in the Philippines is expected to drop to below 4 percent by the end of the third quarter of 2023 and below 2 percent by the first quarter of 2024, the government announced Tuesday, January 24.

According to Bangko Sentral ng Pilipinas (BSP) Governor Felipe M. Medalla, while speaking at an economic briefing in Frankfurt, Germany, the government is expecting a successful bringing down of inflation.

Inflation has been a great concern for the country in 2022, with rates reaching as high as over 8 percent, the highest in 14 years and well beyond BSP’s target inflation rate of 2-4 percent.

The Monetary Board has raised interest rates by 350 basis points in 2022 to combat the rising inflation rates, bringing the policy rate to a 14-year high of 5.5%.

Meanwhile, Medalla also noted that the supply shocks of last year were much worse than in previous years, leading to above-target inflation that is expected to last for around 16-18 months before normalizing.

The BSP’s first policy meeting of 2023 is scheduled for February 16th, and Medalla has already signaled that more rate hikes are likely to be implemented to bring inflation to the 2-4% target range. He also acknowledged that the pace of tightening by the US Federal Reserve, which caused the peso to depreciate against the US dollar, was a significant factor in determining BSP policy.

However, Medalla also said that the peso has begun to appreciate as the dollar weakened and inflation expectations were managed.

Finance Secretary Benjamin E. Diokno said during the same economic briefing that the main concern internationally is inflation, adding that the government is “doing everything we can to manage prices of commodities, which means we hope to produce more and increase the productivity of the sector.”

The Philippine Statistics Authority is set to release the inflation data for January on February 7th. (GFB)