, Philippines

Philippines' 2013 inflation could possibly dip to 3.8%

Versus the previous 4.1% forecast.

According to DBS, their inflation forecast for 2013 has been notched down to 3.8% (from 4.1% previously). Price pressures have not materialized yet despite robust economic growth.

Moreover, despite, the upward skew in inflation print due to higher sin taxes, inflation is still relatively low at 3.4% YoY in February.

This sweet spot of high growth and low inflation is likely to continue for the coming 2-3 quarters as peso strength helps to dampen imported price pressures.

Here's more from DBS:

However, the current depressed level of inflation is unlikely to continue beyond the coming two quarters. Notably, domestic economic momentum remains strong and an updrift of headline CPI towards 4.5% by the end of the year is likely as demand-pull inflation starts to show.

With the central bank (BSP) targeting an inflation range of 3-5%, there is no imminent need for monetary tightening.

Moreover, credit growth, while accelerating, has not been excessive over the past year. Instead, coping with portfolio inflows and peso strength remains BSP’s primary concern at this point.

The policy rate is expected to be kept unchanged this week.

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