The government will not be able to reach its inflation target this year, the central bank’s chief said Wednesday.

In a forum with Economic Journalists of the Philippines, Banko Sentral ng Pilipinas (BSP) Governor Felipe Medalla said the Philippines will miss its 2 to 4 percent inflation target.

“Clearly, we’ll miss our 2 to 4 percent target due to the fact that the last two headline inflation numbers are higher than expected, you’ll of course expect an upward revision,” Medalla said.

In a Powerpoint presentation, Medalla showed that the inflation outlook of the BSP for 2022 was at 5 percent.

Medalla said they are taking action to reduce the inflation rate from 4.2 to 4 percent this year and from 3.3 percent to 3 percent in 2023.

“Of course, it’s easier said than done and if we focus too much on that and ignore the effects on output, the output loss could be very large,” he said.

Obsessing about the midpoint target band could force the country to sacrifice a lot of gross domestic product (GDP), he added.

Medalla said policy and natural events could affect prices of commodities.

“It’s just that there are times when the supply shocks and the global shocks are just too powerful. Of course also, as shown by the sugar incident, both natural and policy could affect prices. Bad weather, expensive fertilizer, reduced sugar supply increased sugar prices,” he said.

Medalla said letting bureaucrats decide on importation is a “formula for disaster” because the government may end up with too much or not enough imports.

Reports of softdrink companies closing down would also affect the government badly because sugary drinks are heavily taxed, he said.

He said to protect the sugar industry the debate should be on the “tariff level” and to let the farmers handle the importation.

“Let people who bet their money on the shortage or surplus do the importing because they have the biggest incentive to make their forecast right. You forecast a shortage, you import and there’s no shortage, you lose your money,” Medalla said. Jaspearl Tan/DMS