MANILA - The elevated inflation in the Philippines is expected to cause a more pronounced deceleration in terms of growth and household spending, Fitch Solutions Food and Drink Analyst Damien Yeo said on Wednesday.
Inflation in December exceeded forecasts as 8.7 percent due to higher increases in housing, rental, power and electricity rates and the continued increase in vegetable prices.
The country's economy expanded by 7.6 percent in 2022 but analysts as well as the government expect a slower but still robust growth in 2023.
"Elevated inflation will be the main headwind while consumer spending in the Philippines isn’t doing better than it is currently doing now and the risk is that inflation staying elevated for longer than anticipated which will then erode the purchasing power of Filipino households," Yeo told ANC.
"We expect a more pronounced slowdown to take over the coming quarters and we expect the impact of high prices on household spending to be more evident in the months ahead...So the Philippines also has relatively low levels of per capita income which means that the slowdown in household spending could be more pronounced the longer inflation stays elevated," he added.
Although inflation is expected to ease slightly to 5.4 percent in 2023 from 5.8 percent in 2022, Yeo said there is still an upside risk from food supply disruptions.
The government said inflation is expected to decelerate this year before reverting within the 2 to 4 percent target in 2024. However, January's inflation print overshot the Bangko Sentral ng Pilipinas forecast of 7.5 to 8.3 percent.