DECEMBER INFLATION SLOWS TO 6.6%

MANILA, January 6, 2006
 (STAR) By Des Ferriols - The country’s inflation fell to a 16-month low in December as food prices rose at a slower pace, easing pressure on the Bangko Sentral ng Pilipinas (BSP) to raise interest rates.

The National Statistics Office (NSO) reported yesterday that consumer prices rose by a lower than expected 6.6 percent in December, leading to an average rate of 7.6 percent for the whole of 2005.

The government had expected the 2005 inflation at between 7.7 percent and 7.9 percent.

Last year’s average inflation, however, was 1.6 percentage-point higher than the six-percent rate recorded in 2004.

BSP Governor Amando M. Tetangco Jr. said the December inflation was in line with the expected moderation in price surges, dampened largely by increased purchasing power fueled by the appreciation of the peso resulting from record-high remittances from overseas Filipino workers (OFWs).

"This will provide some elbow room for monetary policy particularly given some easing in oil prices," Tetangco said.

Tetangco said the BSP will continue to monitor developments affecting consumer prices.

"Pressures from the value-added tax adjustment and other shocks could be muted by easing fuel prices and the appreciation of the peso especially if these favorable price trends are sustained," Tetangco said.

Lower global oil prices are reducing inflationary pressures in Southeast Asian countries such as Indonesia, Thailand and the Philippines, giving their central banks room to hold off from raising borrowing costs. Strengthening currencies are also helping to damp the price of imports.

"Crude oil prices have come off and if they stay at the level we see they’re at, upward pressure on prices will weaken,’’ said Song Seng Wun, an economist at CIMB GK Research Pte in Singapore. "Stable though still-high oil prices will lead to more stability. We have seen that in Thailand, we have seen that in Indonesia.’’

For 2006 and 2007, the BSP has set an inflation target of between four and five percent.

Core inflation

All commodity groups in the consumer price index (CPI) basket save for housing and utilities posted slower annual inflation rates for the month.

Excluding volatile food and energy items, core inflation for the month eased to 5.8 percent, compared to core inflation of 6.1 percent in November, the government statistics office said.

The NSO also reported that the inflation rate in the National Capital Region (NCR) slowed by 0.6 percentage point to 7.4 percent in December from eight percent in November mainly due to the 1.9 percentage points slowdown (4.1 percent from 6.0 percent) in the rate of the heavily weighted food, beverages and tobacco (FBT) items.

The downward trend in the rates of the other commodity groups except for H&R and FLW also contributed to the decline. The average inflation in the area was 8.6 percent compared to 5.8 percent recorded a year ago.

On the other hand, the NSO said the inflation in Areas Outside the National Capital Region (AONCR) eased to 6.4 percent in December from 6.8 percent in November due to the slower movements in the annual price increments of all the commodity groups except for clothing and housing and repairs.

Compared with November 2005, the general level of consumer prices increased at a slower pace of 0.3 percent in December from 0.8 percent as prices of petroleum products went down during the month. Moreover, reduction in the price of rice along with the slower upward adjustments in the prices of selected food groups such as cereal preparations, dairy products, eggs and fish also contributed to the downtrend.

For 2006, the BSP’s inflation target is five to six percent and it has revised its 2005 target to 4-5 percent.

Tetangco said the new 2007 inflation target was consistent with the growth target of 6.1 percent to 6.5 percent, with a gradually decelerating path towards lower inflation rate.

STRONG PESO HURTING BUSINESSMEN - CONCEPCION  The STAR 01/05/06

The strengthening of the peso vis-a-vis the dollar is actually hurting businessmen, Consumer and Oil Price Watch (COPW) chairman Raul Concepcion said yesterday.

"The supposed good showing of the peso against the dollar is actually hurting the businessmen because this means that they have to sell their stocks at the present exchange rate when in fact they bought it at a higher rate," he said during the weekly Fernandina Media Forum held in AA Cebu BBQ in Greenhills, San Juan.

Concepcion said the prevailing peso-dollar rate, which was mainly due to the influx of dollar remittances from overseas Filipino workers (OFWs), could not really be relied upon as an indicator of the real economic condition of the country.

Malacañang has been asserting that the bullish showing of the peso is supposedly a reflection of the stability of the economy under her administration. — Sandy Araneta


Chief News Editor: Sol Jose Vanzi

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