Philippines' inflation to hit 3.4% in February

Analyst predicts more signs of inflation amid surge in GDP.

According to DBS, inflation has been very well contained over the past year despite the surge in GDP growth. For February, inflation of 3.4% YoY has been penciled into DBS' forecast.

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To an extent, the strength of the peso has helped to reduce imported inflation. However, a closer look into the breakdown ofthe CPI basket does show some early signs of demand-pull price pressure.

The furnishing, household, equipment & routine maintenance componentrose by 4.9% YoY in January (outpacing that of headline CPI at 3.0%) afterticking up overthe past six months.

Going forward, more signs ofinflation are likely to appear amid robust economic growth, especially once construction on the public-private partnership (PPP) projects kicksin.

Oil prices will be anotherfactorto watch. Signs ofstabilization in the major economies have led to elevated oil prices over the last 2-3 months. Some pass through to consumer prices is inevitable due to limited subsidies on fuel.