DEC INFLATION RATE SLOWS TO 3.1%;  BUDGET DEFICIT FOR '03 WELL BELOW TARGET

MANILA,  January 7, 2004 (STAR) By Rica D. Delfinado - Consumer prices rose by a slower 3.1 percent in December, bringing the average inflation for the whole of 2003 at 3.1 percent, better than the government target of 4.5 percent to 5.5 percent, the National Statistics Office (NSO) reported yesterday. The full-year average for last year stood at 3.1 percent, the same level as in 2002, the government statistics office said.

Bangko Sentral ng Pilipinas (BSP) Governor Rafael B. Buenaventura said that a lower inflation rate in December should allow monetary authorities flexibility in policy. "The inflation rate is within expectations. Itís a good base to start the year and gives us room," he said.

AB Capital economist Jose Vistan said the benign inflation rate for 2003 was brought about by adequate food supplies, particularly rice, the countryís staple. "We had an adequate supply of rice," Vistan said, adding it had been "a relatively good year for the Philippines in terms of weather." "There wasnít enough pressure to push prices (up) and there was adequate supply, particularly for poultry throughout the year. Some of the food companies were actually worried there would be a glut," Vistan said.

Vistan said the low inflation was "really more positive than negative... given that the weight of the (consumer price index) is heavy on items that are very basic in nature and addresses the needs of the bigger majority, the poor."  He added the low inflation rate also helped to keep interest rates down. A slowdown in price increases in almost all sectors caused the inflation rate in December to decelerate to 3.1 percent compared with 3.3 percent in November, the government statistics office said. However, the NSO said that for December, there was a marked increase in market prices of rump, beef brisket, pork ham and pork liempo due to the holiday demand.

Chicken prices increased dramatically by nearly 15 percent due to tight supply as producers slaughtered culled chicken prior to December due to the higher cost of feeds. Neri said that on a year-on-year comparison, prices rose faster in Metro Manila (4.2 percent) compared to rural areas (2.7 percent). For this year, analysts expect inflation to rise to about five percent due partly to increased spending for the May national elections. Economists have voiced concern that a weak peso which touched a record low in November last year and campaign related spending could push inflation higher this year. Socioeconomic Planning Secretary Romulo Neri said yesterday the government has set an inflation target of four percent to five percent for 2004.

"The target considers the impact of the continuing high prices of Dubai crude oil, the lagged effect of the weaker peso in 2003, adjustments in electricity prices and possible wage pressures," Neri said.

Budget deficit of P199-B for í03 well below target By Des Ferriols The Philippine Star 01/07/2004

The budget deficit for 2003 reached P198.6 billion, about P3.4 billion less than the P202-billion target for the whole year, it was announced yesterday. Finance Secretary Juanita Amatong told reporters that the governmentís fiscal position ended better than expected last year as a result of tighter budget controls and significant improvements in revenue collections. "There are numbers that are not in yet but as of yesterday, the deficit was at P198.6 billion," Amatong said. "There was an increase in the month deficit in December but that was not unexpected."

According to Amatong, the tightening of government expenditures was deliberate and even the unpredictable impact of constructive cash was successfully contained in the final months of the year. "This year, our marching orders are the same: We will maintain our austerity measures and tight budget controls," Amatong said. The Arroyo administration overshot its revenue target for 2003, propelled mainly by the record performance of the Bureau of Customs (BOC) and the improvements in the collection of the Bureau of Internal Revenue (BIR). Amatong said the 2004 deficit target will be maintained at P198 billion. Applying the same fiscal strategies it used this year, Amatong expressed optimism that the government could at least meet its deficit target, if not surpass it.

"What we have to do is to demonstrate that the fiscal program is not faltering," she said. "We have to show a downward trend in the deficit over a long period until we balance the budget in 2009." Expenditures were offset by the record performance of the BOC which, according to Customs commissioner Antonio Bernardo, reached P106.047 billion, way above the P100.057 billion target set at the beginning of 2003. The target was surpassed as early as November when the BOC announced that its collection has already reached P103.058 billion with two weeks still left before the end of the year. Revenue Commissioner Guillermo Parayno, on the other hand said the BIRís collections were expected to be at least P1 billion over its full-year target although the bureau was still finalizing its numbers.

"Our worst case scenario is that we could miss our target by P200 million, but the best case scenario is that we will exceed it by P1 billion," Parayno said. "But based on early indications, there is a good chance that we will exceed this target by over P1 billion." In November alone, the Department of Finance said the government managed to create a P30-billion headroom as the national deficit closed at P172 billion with only one month to go before the year-end.


Reported by: Sol Jose Vanzi

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