ING economist Nicholas Mapa says inflation in the Philippines may linger, unless oil prices come down and offer a reprieve in the back half of the year.
The economist said inflation in the Philippines"is here to stay mainly because there are second round effects kicking in," pointing to rising wages and transportation costs over June.
He predicted that inflation will remain high for the rest of the year, unless oil prices come down and offer a reprieve in the second half. The Philippines imports all of its crude oil, which has risen dramatically in price in recent months.The economist also noted the new government of Ferdinand Marcos Jr. revised its growth target downwards to 6.5%, which he said indicates Manila accepts higher inflation will cut into growth in the second half of the year.
"However, there's a countervailing force in … that the economy is reopening so we're likely to see more capital machinery come in as well as raw materials as construction activity comes back to life," Mapa said. While the Philippines would see very strong growth in the first half of the financial year, with first quarter growth clocking in at 8.3%, he predicted higher inflation will likely weigh on the second half.
"2022 will be a year of two halves … the fiscal picture will not contribute to a good number in the second half of the year," he said.
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