MANILA – Fitch Solutions has slashed its average inflation forecast for 2020 after noting subdued domestic activity because of the pandemic.
In a report, the unit of Fitch Group now forecasts this year’s inflation to average at 2.5 percent from 2.7 percent previously, but kept its 3-percent projection for next year.
It said economic activity has posted some improvements, citing the rise in Purchasing Managers index (PMI) for September to 50.1 from month-ago’s 47.3.
A PMI of above 50 shows an expansion while a print below 50 indicates weakness.
The report, however, noted Google mobility data showing that retail and recreation activities declined by 61 percent below regular level, and grocery and pharmacy activities down 34 percent.
“As such, we believe demand-side inflationary pressures will remain subdued such that inflation averages lower,” it said.
Inflation in the first eight months this year averaged at 2.5 percent, at the lower half of the government’s 2 to 4-percent target band until 2022.
After two consecutive months of faster inflation rate, the August 2020 print slowed to 2.4 percent from 2.7 percent last July.
Last week, the Bangko Sentral ng Pilipinas’ (BSP) policy-making Monetary Board reduced its average inflation forecast for 2020-2022 to 2.3 percent, 2.8 percent, and 3 percent, respectively.
These were previously at 2.6 percent, 3 percent, and 3.1 percent for 2020-2022. (PNA)
