MANILA - Philippine inflation may breach the government’s target this year as the economy reopens and service industries see a surge in demand, an economist from Moody’s Analytics said on Thursday.
Steven Cochrane, chief Asia-Pacific economist at Moody's Analytics, said inflation is likely to quicken to 4.1 to 4.2 percent in 2021, above the government’s 2 to 4 percent target range even if the government manages to tame surging food prices.
He said food prices may not rise as much in previous months as supply chains get back in order, but there could be inflation in services as the year progresses.
Cochrane said the economy is likely to grow 6.5 to 7 percent this year, lagging behind Vietnam and Singapore in the region, as the country continues to feel the effects of last year’s “very long and strict quarantine.”
“They were stricter and longer here than about just anywhere else,” he said.
Another drag on growth is the country’s “modest” level of stimulus spending, which pale in comparison to its neighbors like Singapore and Malaysia.
The Philippines is also slower than its neighbors on vaccine rollout, Cochrane said, with the country seen achieving herd immunity through vaccination by early next year at the earliest.
Cochrane said that non-performing loans or bad loans will be a problem for banks and regulators will have a big task ahead to manage bank losses and maintain lending.
But on the whole, the country’s debt levels--both sovereign and corporate-- remain manageable, as they remain below average for emerging markets around the world, he said.
“So I don't think the ph not is at that point yet where they're not going to be able to reach out to the bond market and fund any extraordinary kind of spending that they may need to to put in place in the coming year or so,” Cochrane said in an interview with ANC’s Market Edge.