HIGH oil and rice prices are expected to drive inflation to 4.2 percent in the second quarter, breaching the Bangko Sentral ng Pilipinas' (BSP) 2.0- to 4.0-percent target.
The pace of consumer price growth will then slow in the following three months, private sector economists said, allowing for a within-target average of 3.8 percent for 2024.
The inflationary impact of elevated rice and oil prices, economists from First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P) said, will be tempered by softer prices of other food products and base effects.
Rice prices also "have little upside," they said in the April edition of The Market Call report released last Friday, as Vietnam started harvesting in March and had committed to provide the Philippines with up to two million metric tons of the staple.
Crude oil prices, meanwhile, have "had difficulty moving beyond $86 per barrel" — this is for the West Texas Intermediate benchmark — as production outside of the Organization of the Petroleum Exporting Countries (OPEC) make up for output cuts by the cartel.
Third and fourth quarter inflation will subsequently average within the BSP's 2.0- to 4.0-percent target, the economists said.
Consumer prices rose for a second straight month to 3.7 percent in March as food and transport costs increased. Rice inflation, in particular, picked up to 24.4 percent from 23.7 percent.
Houthi attacks in the Red Sea and OPEC's decision to extend output cuts, meanwhile, drove the rise in transport costs to 2.1 percent from 1.2 percent in February.
These brought first-quarter inflation to 3.3 percent, the economists noted.
Employment and manufacturing gains in February and March, meanwhile, prompted a revision to FMIC and the UA&P's first quarter growth forecast to 6.2 percent from 6.1 percent previously.
Gross domestic product (GDP) growth a year earlier was 5.5 percent.
Preliminary growth data for the first quarter of 2024 will be released by the Philippine Statistics Authority on May 9.
The government last month lowered its GDP growth target for this year to 6.0-7.0 percent, from 6.5-7.5 previously, given continued global headwinds including stubborn inflation and geopolitical tensions.
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