Heavy Economic Storm Clouds Over RP

Written on Friday, July 4th, 2008 at 3:42 pm | by Ding G. Gagelonia

The nation rolled out the red carpet for the ‘Nation’s Fist’, Manny Pacquiao today for what both the Philippine Daily Inquirer and President Arroyo called “a masterpice” of a victory over Mexican Diaz, a slam-bang win that, from where we sit, elevated the PacMac into the pantheon of Filipiino boxing greats where he now joins the immortal Pancho Villa and Gabriel Flash Elorde.

But the celebration has to now quickly die down with this sobering report that the prices of goods and services increased by 11.4 percent in June, the highest in 14 years. ABC-CBN NEWS online is saying this “has set the pace for doble-digit inflation for the coming months.”

“The National Statistics Office released the recent inflation data Friday after much anticipation on how much higher prices were last month. The June figure, however, was beyond previous forecasts, including the central bank’s, which ranged from 10.4 percent to 11.2 percent.

It was the second highest since May 1994, when inflation was at 11.5 percent.

The June inflation rate put the average for the half of the year at 7.6 percent, well above the central bank’s full-year target of three to five percent.

In 2007, inflation averaged at 2.8 percent. The upward trajectory started early this year and picked up the pace in April, when month-on-month difference was more than two percent. In May, it was almost hit double-digits with revised figure of 9.5 percent.

Higher prices up to September

Faster pace of price increases should be expected in the coming months. According to central bank governor Amando Tetangco Jr., double-digit inflation rate levels would last up to September this year.

“The peak of the inflation path is expected to occur in the third quarter of 2008, to be followed by a steady decline towards single-digit levels in 2009,” he said. Earlier, the central bank projected that the average 2008 inflation rate would remain at single digits.

The central bank, which has been setting key monetary tools, such as interest rates, based on inflation, is set to meet on July 17. Six weeks ago, it raised overnight rates by 25 basis points.

Food prices soar

Meantime, local food and energy prices, the two most prominent items that have been increasing in the past months, have caused other products and services to rise too.

Core inflation, which eliminates the impact of volatile food and energy prices, rose to 6.6 percent from 6.2 percent in May.

The cost of food, which account for half of a household’s budget, jumped 17.4 percent in June, higher than the previous month’s 14.2 percent.

The price of rice, a staple food in the country, rose by 9.3 percent compared to 5.8 percent in May. The price increases rose despite efforts by the government to provide subsidies reduce farmers’ production expenses. It also subsidized imported rice influenced by higher trade prices in the world market as exporting countries hoarded supply.

The soaring price of rice nationwide was coupled with increases in other food items, such as bread (imported flour prices were up), fruits, vegetables, meat (more expensive feeds), and fish (lesser fishing trips due to weather conditions). Fuel, light and water prices rose 7.6 percent compared to 8.2 percent in May.
Oil, on the other hand, continues to break records, with crude oil reaching more than $145 per barrel. The Philippines imports almost all its oil supply.
Gasoline and diesel prices continued to increase almost every weekend causing those in the transportation industry to request for rate hikes, which is expected to result in requests for higher wage rates.
Tuition fee hikes, increments in the prices of school supplies, textbooks and medicines in June were also observed, accelerating the services index nationwide by four percent. ”

The report goes on to quote one analyst as saying the dark storm clouds would not necessarily lead to social unrest. This portion of the report certainly is debatable with the analyst getting ahead of himself.

Let’s leave this part of the equation to our legion of socio-political pundits, including professor Randy David and the equally seminal MLQ 3, who are this writer’s favorites.

For now my own gut feel is that the storm clouds will get even darker and could move us dangerouslt close to what professor Leonor Magtolis Briones calls “the perfect economic storm.”

Hold tight.

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About The Author: Ding G. Gagelonia is a journalist of some 30 years, having worked in both radio and TV news and public affairs since his teens. Ding Gagelonia now writes independently and does corporate communications consulting. He has two kids, Felice and Luis. His journalist blog is at midfield.wordpress.com

Filed Under Business and Economy, National News, Society

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Comments

5 Responses to “Heavy Economic Storm Clouds Over RP”

  1. cvj on July 4th, 2008 4:16 pm

    On the likelihood of social unrest, Gloria Arroyo’s populist card may have set the tone.

  2. Mikey_Liling on July 4th, 2008 5:11 pm

    Filipinos are stupidly resilient.

    With the upcoming elections less than 2 years from now, the mood of the Filipinos is akin to the Israelites waiting for deliverance from their Egyptian Masters.

    A perfect storm is not enough to shake us from our stupor; we require an Act of God. Unfortunately, Moses and the plagues won’t be coming soon.

    Noli de Castro as President and Bong Revilla as Vice President, when that happens, maybe.

    But then again, these two are populists, and both are good looking.

    Time to go to the DFA office and renew my Philippine Passport.

  3. The turning of the tide « smoke on July 5th, 2008 11:22 pm

    […] stark contrast to the gloom and doom being peddled over at Filipino Voices, Mangun opines that: Now, the difference between the […]

  4. Lee Angelo on July 6th, 2008 12:08 am

    Even Indonesia, a lagging country in the south-east, posted a slightly better mark of 11.03% inflation for June.

    On a brighter note, our inflation rate of 11.4% is way better than Vietnam’s rate for the past month (June 2008), which is 26.8%.

  5. mat on July 7th, 2008 12:24 pm

    RP’s inflation rate of 11.4% could be grossly understated. Arroyo’s administration has an uncanny penchant of manipulating and understating bad news while unusually boasting trivial successes (visit at U.S., meeting with Sen. Cain, call with Obama, etc.).
    I could hardly reconcile the inflation rate of 11.4% with the current prices vis-a-vis last year’s prices of basic necessities, rice, sugar, fuel, etc.
    I suppose that this administration think that their countrymen (Filipinos) are that gullible to believe them on the minimal increase in the inflation.
    Why its so unbelievable? The real increase in the prices of the goods are more than 20% with others even more than 100%. Also, Vietnam has an inflation of around 25%. How could our country have a lower inflation than Vietnam when the latter has much lower prices of rice (major rice exporter), has its own oil export, and a rapidly expanding economy (mostly industrial).
    We’ll I can’t figure it out why 11.4%. Could be more than 20%, if not doctored.

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