5 June 2020
BSP statement on the medium-term view on inflation
The May 2020 inflation of 2.1 percent was within the BSP’s forecast range of 1.9 – 2.7 percent. The latest inflation outturn is consistent with the BSP’s prevailing assessment that inflation is expected to remain benign over the policy horizon due largely to the potential adverse impact of Covid-19 on the domestic and global economic environment.
The latest baseline forecasts indicate that inflation is likely to settle below the mid-point of the government’s target range of 3.0 percent ± 1.0 percentage point for 2020 and 2021. Domestic economic activity is projected to follow a U-shaped quarterly recovery path. Growth is expected to accelerate back to the potential output growth in 2021 once the impact of government policy support measures gains traction. With the recent recovery in global crude oil prices following the OPEC production cut, the volatility in oil prices remains a key source of inflation risk. Meanwhile, global rice prices continued to increase due to lower production among major producers in the ASEAN region amid the on-going drought in the Mekong Delta.
The BSP reiterates its support for urgent and carefully coordinated measures with other government agencies to alleviate the spillover effects of the Covid-19 pandemic on households and firms, with a view toward preventing any long-lasting economic and social adverse impact. In addition to the monetary policy actions that have been announced, the BSP stands ready to deploy all available measures in its toolkit as it continues to assess the impact of the global pandemic on the domestic economy.
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