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BSP: Economists see 3.1% inflation for 2017

ECONOMISTS expect inflation to settle at 3.1 percent this year, slightly lower than the Bangko Sentral ng Pilipinas’ (BSP) full-year estimate of 3.2 percent.

"Analysts noted possible upside risks to inflation such as volatile global oil prices, weaker peso, initial implementation of the comprehensive tax reform program, government spending on infrastructure, rise in utility rates, robust consumer spending during the holiday season, and base effect," the central bank said in its Third Quarter Inflation Report released last week. "On the other hand, a key downside risk to inflation was seen to emanate from global economic recovery," it added. Estimated Dubai crude futures as of end-September showed a higher path for 2017 to 2020 compared to the previous quarter, the report noted. The peso, meanwhile, had depreciated against the US dollar by 2.2 percent on September 29, 2017, closing at P50.82:$1. With regard to proposed tax reforms, the report said that plans to use revenues for infrastructure programs would generate gains for the economy. "The positive spillover effects on investor sentiment would create a virtuous cycle of higher investment and higher income over the medium to long term," it said. "The resulting expansion in productive capacity of the economy is seen to moderate inflationary pressures over the medium to long term," it added. Potential sources of upside pressures from power prices, meanwhile, were identified as including Manila Electric Co.'s existing petitions for rate increases with Energy Regulatory Commission, the Power Sector Assets and Liabilities Management' pending petitions for the recovery of "true-up" adjustments of fuel and purchased power costs and the National Grid Corporation of the Philippines' applications to recover connection and residual sub-transmission charges for 2011-2013 and the costs of repairing facilities damaged by force majeure events in 2011-2012. The BSP report noted that a recovery in global growth appeared to have broadened, with economic activity in the United States, eurozone and having expanded faster and gross domestic product growth in China growing stronger than expected. Based on the probability distribution of forecasts by 23 out of the 29 respondents, the Bangko Sentral noted a 91 percent chance that the average inflation would fall within the official 2 percent to 4 percent target For 2018, meanwhile, the economists gave a mean inflation forecast of 3.4 percent, faster than the BSP's 3.2 percent estimate. SOURCE:

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