Gov’t now expects 2018 inflation to reach as high as 4.5%

Ralf Rivas
The government previously pegged inflation at just within 2% to 4%, but prices keep rising. Meanwhile, the deficit forecast is also raised to 'sustain the momentum of the Build, Build, Build program.'

MANILA, Philippines – Amid surging prices of goods in the first 5 months of the year, the Development Budget Coordination Committee (DBCC) revised its inflation outlook for 2018.

Budget Secretary Benjamin Diokno announced in a press briefing on Monday, July 2, that the government now expects inflation to settle between 4% and 4.5% for the whole year. The government previously pegged inflation at just within 2% to 4%.

Average inflation for the first 5 months of the year clocked in at 4.1%. Inflation in May reached a fresh 5-year high of 4.6%.

Economists of the Bangko Sentral ng Pilipinas (BSP) projected June inflation to fall within 4.3% to 5.1%.

Economic managers expect inflation to taper off in the second half of the year. 

“Inflation has been decelerating, the rate of increase month-on-month has been declining,” Diokno said.

For 2019 to 2022, the DBCC retained the previous outlook of 2% to 4%.

Meanwhile, the government has slightly raised the country’s deficit ceiling forecast to 3.2% from 3% for 2019. The planned deficit is set at P624 billion for 2019 and up to P774.3 billion in 2022.

A deficit ceiling is the maximum total amount that the government can borrow. This is measured as a percentage of the country’s gross domestic product (GDP).

“We have slightly adjusted the deficit forecast in order to maintain the aggressive spending strategy that will sustain the momentum of the Build, Build, Build program,” said Finance Secretary Carlos Dominguez III.

The government maintained the economic growth target at 7% to 8% medium term.

Socioeconomic Planning Secretary Ernesto Pernia said they “remain optimistic” of hitting the growth target because of “higher household consumption” and the aggressive infrastructure push.

The DBCC is the body tasked to review the government’s fiscal program. Economic managers will submit the 2019 National Expenditure Program during President Rodrigo Duterte‘s 3rd State of the Nation Address (SONA) on July 23.

Ralf Rivas

A sociologist by heart, a journalist by profession. Ralf is Rappler's business reporter, covering macroeconomy, government finance, companies, and agriculture.