SWITZERLAND'S UBS  REVISED  INFLATION  FORECAST  FOR  RP


MANILA, APRIL 18, 2008
(STAR) By Iris C. Gonzales - Switzerland-based UBS has revised upward its inflation forecast for the Philippines amid soaring rice and oil prices.

However, Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said monetary authorities remain vigilant against the second round effects of higher commodity prices.

“We would continue to exercise appropriate liquidity management to make sure that the amount of money is consistent with the requirements of the economy,” Tetangco said.

UBS, for its part, revised its inflation forecast for this year to 6.7 percent from 5.3 percent previously.

“With gains in rice prices, consumer price inflation is likely to be higher than we anticipated,” UBS said.

UBS also cautioned against increasing the wages of workers, saying that this would lead to higher inflation.

“Indeed, in the Philippines, calls for a higher wage growth pose further upside risks for inflation and policy rates,” UBS said.

The nationwide Inflation rate rose to 6.4 percent in March from 5.4 percent in February.

Labor groups have called for a wage hike to help wage earners cope with the rising costs of living. Some groups have asked for a P60 to P80 a day wage hike, while militant workers want P125 across-the-board.

Employers, however, are opposing the grant of additional pay to employees, saying that conditions are also hard for companies.

Tetangco said the most significant risk to inflation still comes from elevated oil and non-oil commodity prices, which are outside the control of monetary tools.

“As you are aware, these are supply-side factors for which monetary policy is probably not the best tool to use,” Tetangco said.

Tetangco assured that monetary authorities will continue to monitor movements in global and domestic commodity prices as these directly feed into inflation.

BSP cautions on inflationary effect of wage hikes By Iris C. Gonzales Friday, April 18, 2008

The Bangko Sentral ng Pilipinas (BSP) cautioned the government against adjusting wages in the country, saying that this may lead to a higher inflation.

A ranking BSP official said that while monetary authorities recognized the need to adjust current wages, the government needs to be careful in determining the amount of wage increase to be given to workers.

“We recognized that there should be adjustments in the transport fare and in the wages because prices of gasoline have gone up. But we have to be careful on the magnitude, about the amount of the adjustment because if it’s too big an adjustment, the workers may end up on the losing end,” said the BSP official.

The official said that if the adjustment in wages and transport fare would be too much, it may only result in a higher inflation.

“So, we have to be careful,” the source said.

Labor groups have called for a wage hike to help wage earners cope with the rising costs of living. Some groups have asked for a P60 to P80 a day wage hike, while militant workers want P125 across-the-board.

Inflation in March rose to 6.4 percent from 5.4 percent in February.

Employers, however, are opposing the grant of additional pay to employees, saying that conditions are also hard for companies.

The Employers Confederation of the Philippines has announced that it will be supporting a wage hike for workers, noting that the consumer prices have been growing at a rate faster than government’s projection of three percent to five percent for this year.

The Department of Finance (DOF), for its part, said it is supporting the grant of income tax exemption for minimum wage earners but stressed that this needs to be legislated.

A Finance official said proposals are already pending in Congress.

“It’s now up to Congress,” the Finance official said.


Chief News Editor: Sol Jose Vanzi

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