Inflation, economic outlook for PH, Asia Pacific | The Exchange
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2023 saw higher inflation, fuel prices, and interest rates not just in the country but also around the region. Where does the Philippines stand compared to its neighbors? We have an exchange with Moody's Analytics senior Asia Pacific economist Katrina Ell from Sydney.
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2023 saw higher inflation, fuel prices, and interest rates not just in the country but also around the region. Where does the Philippines stand compared to its neighbors? We have an exchange with Moody's Analytics senior Asia Pacific economist Katrina Ell from Sydney.
Visit our website for more #NewsYouCanTrust: https://www.cnnphilippines.com/
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NewsTranscript
00:00 [Music]
00:09 Glad you're staying with us right here on The Exchange, where your business is our business.
00:14 I'm Rico Gizon.
00:15 2023 saw higher inflation, fuel prices and interest rates, not just in the country but also around the region.
00:24 Where does the Philippines stand compared to its neighbors?
00:27 Let's now have an exchange with Moody's Analytics Senior Asia Pacific Economist, Katrina L.
00:32 Joining us now from Sydney.
00:34 Katrina, the country's inflation rate soared to 6.1% in September, the second straight month of faster price increases.
00:42 Is this unique to the Philippines or are other Asia Pacific nations also seeing an upward trend?
00:47 It's certainly not unique to the Philippines, unfortunately.
00:51 What we're seeing is that there is this broader trend in Southeast Asia and also across the region as well,
00:58 where we're seeing higher food prices, particularly for rice prices, and to a lesser extent, higher transport costs as well,
01:05 coming from elevated global oil prices, forcing inflation higher in the region.
01:10 So while in prior months it did look like headline inflation was trending down,
01:16 we are seeing a bit of an uptick through the third quarter and into the fourth quarter.
01:20 Uptick, third and fourth quarter.
01:22 Does Moody's Analytics expect the Philippine inflation rate to even get better during the third and fourth quarters?
01:31 Because the central bank says it is trying to attain a full year inflation number of 2 to 4%.
01:38 I think it's going to be very tricky to get headline inflation in the Philippines on an annual basis,
01:46 so that average to actually get it within that 2 to 4% target range because of the upward pressures that are coming from food prices.
01:54 And while we do expect that we are at about the peak in the cycle,
01:58 we should see food prices remain elevated through the remainder of this year.
02:03 All right. We're seeing this trend in rising prices across Southeast Asia,
02:08 but domestically, the problem with rice supply and higher prices also lies with the big private traders.
02:15 You also have rice cartels, hoarders and smugglers, a problem that needs to be addressed by the government.
02:20 Is this also contributing to the higher prices of rice and also headline inflation in the country?
02:28 I think it's a contributing factor, certainly.
02:32 I mean, what we're seeing is that we have a constrained food supply that's coming from domestic and international factors.
02:39 And I think if we're able to ease those supply bottlenecks, then it will really help Philippines inflation to come down
02:47 because we need to remember as well that elevated inflation disproportionately hurts lower income households
02:53 because they are spending a higher proportion of their income on essential items like food.
02:59 So it's critical that food supply is not constrained to the extent that it is currently.
03:05 All right. Currently, the interest rate environment here in the country is quite high, 6.25%.
03:13 The Philippine Central Bank has held on rates for several months now.
03:18 With elevated inflation levels, is it time for the Banco Central to raise rates yet again,
03:25 which could, of course, down the road, cripple economic growth?
03:31 Our expectation is that we aren't going to see further rate hikes from the central bank in Philippines.
03:37 But the door is certainly open and there is the possibility that we could see one or two more hikes
03:43 because we have seen that there has been some hawkish tones coming out of the central bank
03:48 because they are worried about this recent uptick inflation.
03:52 And so it does certainly keep the door open to further rate hikes.
03:56 But I mean, I don't think further rate hikes are going to cripple the economy.
04:00 I think it's only going to continue to to cool further that sluggish domestic demand that we're already observing.
04:07 But could we see strong domestic demand in the final quarter of 2023 amidst strong holiday sales and holiday consumption?
04:19 So I think what we're going to see is that that ongoing cooling trend in domestic demand
04:25 in the final months of this year for the Philippines, because not only are they grappling with cooler domestic demand
04:31 from elevated inflation and high borrowing costs, but we're also seeing that important manufacturing and export channel is weakened as well.
04:39 And I don't think that the revival of international and domestic tourism is going to be enough to offset those factors, unfortunately.
04:48 The previous quarter, we saw Philippine economic growth slowed down from the six to seven percent highs.
04:55 How does the economic growth initiative in the Philippines compare with our ASEAN neighbors?
05:03 I would say that the Philippines growth at the moment where it stands is actually quite good compared to others in Southeast Asia.
05:11 I mean, let's remember that Philippines isn't alone in terms of dealing with elevated inflation as well as high borrowing cost environment.
05:18 So we're seeing other economies in the region, places like Thailand in particular, that are struggling with much weaker growth.
05:27 And they've also got those higher borrowing costs as well that are filtering through.
05:32 So Philippines is certainly not alone in terms of dealing with weakened domestic demand, particularly household consumption at the moment.
05:39 So what is BUDI's analytics outlook for inflation in October, November and December and for the economic growth of the country in the fourth quarter of this year?
05:50 We're expecting that headline inflation by the end of this year will be within the four to five percent range.
05:58 So it will cool from its current six point one percent that we saw in September.
06:02 And we're looking at full year GDP growth for the Philippines coming in at five point two percent this year, which is quite a bit below the government's optimistic target of that six to seven percent range that they've identified.
06:15 Thank you so much for this regional inflation and economic outlook exchange.
06:20 BUDI's analytics senior Asia Pacific economist, Katrina L., joining us from Sydney.
06:26 And straight ahead on the exchange where your business is our business.
06:30 How are businesses ensuring profitability without turning customers away due to the higher price tags?
06:37 We speak to the Sterling Paper Group of Companies next on CNN Philippines.
06:43 News you can trust.
06:45 [MUSIC]