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Mon May 12, 2008

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MANILA, May 09, 2008 (AsiaPulse via COMTEX) -- A new inflation forecast for this year will be announced probably next week but the Bangko Sentral ng Pilipinas (Philippines' Central Bank) (BSP) declined to give a range.

BSP Deputy Governor Diwa Guinigundo told reporters Thursday said they still have to firm up their figures and coordinate these with the inter-agency Development Budget Coordination Committee (DBCC).

He explained that although they have initial figures on the possible new projection, this will still depend on the movements of prices of imported oil and non-oil commodity products, which to date continue to go up particularly the oil and grains.

The impact of the second round effects or the transportation and wage adjustments is also being studied since the government has yet to decide on this.

Guinigundo said that current prices of oil and food products in the world market indicates that the three to five per cent inflation target for this year will be exceeded.

"We cannot give you the specific range (of the new forecast) precisely because while we have already incorporated some size of the adjustment in wages as well as transportation fare. Things are still very uncertain in respect to the actual magnitude of the adjustment," he stressed.

Guinigundo earlier said the central bank has assumed a seven-percent wage increase this year and adjustments more than this will have an impact an inflation impact.

In April, the inflation or price increase rose to 8.3 per cent from 6.4 per cent in the previous month, with rice inflation in particular at 24.6 per cent from 10.9 per cent in March.

The BSP, in its inflation report for the first quarter of this year, said the palay sub-sector grew by 10.1 per cent in the last quarter of 2007 due to favorable weather conditions and usage of hybrid and high quality grains.

"Despite the favorable palay production, however, domestic rice prices increased sharply in Q1 2008, influenced partly by the surge in imported rice prices which are now at historic highs," the report said.

The government assumption for the price of imported rice is about $US700,000 per metric ton but current prices in the world market is already above $US100,000 per MT.

Deutsche Bank recently said the surge in prices of rice is partly due to the early announcement by the Philippine government of its rice importation program.

However, Guinigundo, who also sits in the Board of the National Food Authority (NFA), pointed out that with or without such announcement, the price of rice in the international market would have gone up anyway due to lower supply and greater demand.

He cited several factors like the tight supply condition in Vietnam and the lower water level in the Mekong River that would be aggravated by the recent flood in Myanmar.

Notwithstanding this, Guinigundo noted the assessment of agriculture officials in the country that domestic rice farmers will stand to gain from agriculture production this year against last year.

He said the problem in the domestic front is that "even though the country remains the major rice producer in the world, the requirement of the people is not being met because of the ballooning population.

"There is no rice crisis in the country since what the Philippines is importing is only the gap in the domestic consumption and production.

"Because of this tight supply condition and the possibility of price going up, we decided to increase our importation by about 600,000 MT, Guinigundo said.

(PNA)

(C) 2008 Asia Pulse Pte Ltd

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