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Inflation surged to 12.5 percent in August, a 17-year high, the
government said Friday, warning that the rise could impact economic
growth targets for this year.
The National Statistics Office also revised
upward the inflation rate in July to 12.3 percent from 12.2 percent.
This brought the average inflation rate for the
eight months to August to 8.8 percent.
“This figure is within [the National Economic
and Development Authority’s] inflation forecast of 12.1 to 12.7
percent,” said authority Director General Ralph Recto.
“But with this trend, meeting the 5.5-percent
growth for the year would be a tough challenge, though it remains
our fighting target,” Recto said in a statement.
Soaring food and energy prices have already
slowed economic growth to 4.6 percent in the first half, down
sharply from more than 7 percent for the whole of 2007.
“Annual inflation rates were higher in the
commodity groups except in the food, beverages and tobacco index,”
the statistics office said in a statement.
Food inflation dropped marginally to 18.1
percent in August from 18.6 percent in July. The increase in the
price of rice, the Filipino staple grain, slowed down to 45.1
percent last month from 50 percent in July.
But fuel cost went up by 7.2 percent in August
from 5.5 percent the month before. Inflation for housing and repair
also rose to 5 percent last month from 4.6 percent in July.
Services inflation reached 13.5 percent last
month from 12.5 percent in July. The cost of clothing increased
slightly to 4.6 percent in August, compared with the 4.5 percent in
July. And the cost of miscellaneous items hit 3.3 percent in August
from 3 percent in the previous month.
Market reaction
The news sent Philippine shares prices 1.1
percent down at Friday’s close.
Goldman Sachs told Dow Jones Newswires it
expected the central bank to raise its key interest rates by
25-basis points this year, probably on October 9, to rein in
inflation.
“Overall though, the extent of the tightening
is likely to be measured as the [Bangko Sentral ng Pilipinas] will
be restrained by continued slowing growth in the coming quarters,”
the company said.
The Bangko Sentral or the central bank last
month raised rates by 25- basis points, taking the overnight
borrowing rate to 6 percent and the lending rate to 8 percent.
Despite the uptick, central bank Governor Amando
Tetangco said the August data indicate inflation has started to
moderate on the back of more stable food prices.
“A reversal in the downtrend of oil prices
remains the biggest risk to the [easing] inflation outlook,” he
said.
Tetangco said the central bank expects inflation
to peak either in September or October, and the average for this
year to be at the lower-end of the forecast range of between 9
percent and 11 percent—albeit outside the official target range of
3 percent to 5 percent.
While the depreciating peso could also fuel
inflation, Tetangco views this as temporary and expects foreign
exchange inflows in the last three months of 2008 from Filipinos
working abroad to start buoying the local currency.
Early Friday, the peso slipped to a fresh
one-year low of P46.80 to the US dollar.
Palace reaction
Government officials said they are moving to
help the public cope with soaring prices of basic commodities and of
fuel.
The Palace’s deputy spokesman, Lorelei Fajardo,
said, “The government has been implementing several programs
through DTI [Department of Trade and Industry] to stabilize the
price of prime commodities [amid a] growing inflation.”
That department is closely coordinating with manufacturers and
retailers of basic necessities and prime commodities to keep prices
at reasonable levels, she added.
Also, the department also “publishes guide
prices [of] basic and prime commodities whenever necessary for the
information and guidance of the consumers. The PITC [Philippine
International Trade Corp.] has also been empowered to intervene
aggressively [in] the importation of prime commodities [to stabilize
prices],” she said.
Fajardo said the government would continue its
infrastructure program and other economic pump-priming activities to
create more employment opportunities.
”The government is also poised to continually
execute its infrastructure program and other economic activities to
create more opportunity for our people to get jobs and earn more
thus increasing public expenditure and investment,” she added.
The Arroyo administration is also optimistic
that fuel and food prices will stabilize in the last quarter, the
spokesman said.
-- AFP, Katrina Mennen A. Valdez and Angelo S. Samonte
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