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Reuters
Inquirer.net

MANILA, Philippines – (UPDATE 2) Annual inflation eased to a 10-month low of 7.1 percent in January on declining food and oil prices, the statistics office said Thursday.

Inflation in December was at 8.0 percent from a year earlier.

Core inflation, which strips out some volatile food and energy items, edged down to an annual 6.9 percent in January from 7.3 percent in December.

Meanwhile, the Bangko Sentral ng Pilipinas, the country’s central bank, said the lower annual inflation in January gave it the flexibility needed to supply the financial system with sufficient liquidity to shield the economy from the global downturn.

“This confirms our expectation for continued slowdown in price increases and gives the central bank more room to support the economy and ensure there is sufficient liquidity for the efficient working of the financial markets,” central bank governor Amando Tetangco told reporters in a mobile phone text message.

Analysts see this as a signal for a further reduction in interest rates of as much as 1 percentage point.

The central bank has lowered rates by a 1 percentage point over the last two months to 5.0 percent for borrowing and 7.0 percent for lending after inflation has steadily come down from a near 17-year peak of 12.5 percent in August.

The central bank will hold its next rate-setting meeting on March 5, the same day February inflation data will be announced.

Des Ferriols
Philippine Star

The inflation rate slowed down to 11.9 percent in September from 12.5 percent in August, a development officials said indicated the softening of prices of basic commodities after weeks of worrisome increases.

The National Statistics Office said, however, that the September figure was still significantly higher than last year’s 2.7-percent inflation rate.

Malacañang rejoiced at the news but warned against complacency.

“There is a warning that we should not be complacent about it, but this is good, that we can maintain our economic stability despite what happened in the US,” Executive Secretary Eduardo Ermita said.

Press Secretary Jesus Dureza said the latest figures showed that the country’s fundamentals remain strong against external shocks.

The September inflation rate brought the average this year to 9.7 percent for the first nine months, which is still within the seven percent to 11 percent projection made by the central bank but significantly above the three-percent to five-percent target for 2008.

Excluding selected food and energy items, however, the NSO said core inflation actually rose to 7.5 percent in September from seven percent in August.

This could indicate a leftover growth momentum for inflation in non-volatile items.

But Bangko Sentral Governor Amando Tetangco expressed optimism that the September slowdown indicated easing inflationary pressures.

This was the Monetary Board’s basis for leaving the monetary policy setting unchanged.

“The September inflation rate marks the turning point towards declining inflation this year and next,” he said. “We will continue to monitor global and domestic developments to make sure that our policy stance remains appropriate.”

The NSO attributed the September slowdown to the slower annual price hikes of the heavily weighted food, beverages and tobacco (FBT) and services items.

Annual inflation rate in the National Capital Region (NCR) also eased to 8.2 percent in September from 8.7 percent in August because of slower price increases last month in FBT and in services and miscellaneous items.

The NSO said consumer prices generally went down month-on-month because of the decline in the prices of rice, corn and meat. The general decline in electricity rates and the series of rollbacks in the prices of LPG, kerosene, gasoline and diesel also contributed to the downtrend.

The government’s official inflation target for 2008 was 3.5 percent to 5.5 percent and for 2009, the forecast was 2.5 percent to 4.5 percent.

However, runaway world oil prices caused the inflation rate to swerve sharply from the target.

This made the Bangko Sentral ng Pilipinas (BSP) accept the likelihood of off-target inflation rate for 2008 and possibly for 2009 as well.

The BSP then projected the inflation rate to reach seven to nine percent in 2008 and four to six percent in 2009.

But according to the BSP, the September inflation increased the likelihood of single-digit inflation figures by the first quarter of 2009.

The MB noted earlier that the emerging inflation outlook reflected “recent easing” in global food and oil prices. This indicated that domestic prices might also start to moderate, reducing the need for monetary tightening.

The BSP has consistently stated that despite the economic slowdown, the country is still expanding at a “respectable level” and that remittances would continue to fuel private consumption, the powerhouse behind the country’s resilient growth.

Decelerating rate seen

After deciding to keep its monetary policy settings steady for the next six weeks, the BSP said it is looking at a “notional” inflation target of 2.5 percent to 4.5 percent for 2010, which is based on the original 2009 target.

Tetangco said the inflation outlook considered by the MB indicated steady deceleration to single-digit levels by early 2009.

“The improving inflation outlook would bring us to the target-consistent path by 2010,” Tetangco said.

BSP deputy governor Diwa Guinigundo said the BSP still has to present its 2010 and 2011 inflation targets to the Development Budget Coordinating Committee (DBCC).

“The latest forecast shows that for 2010, we’re within range,” Guinigundo said.

He said the possibility of the inflation rate dropping back to single-digit levels by the first quarter of 2009 is even more possible now considering the latest figures.

Earlier this week, economic officials downgraded their projections, with the growth in gross domestic product now expected to slow down to 4.7 percent this year and even to as low as 3.8 percent if the US economy slips into recession.

- With Paolo Romero

Marvin Sy
Philippine Star

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We are not alone – in experiencing high prices of goods and services, that is.

Deputy presidential spokesman Anthony Golez emphasized that the Philippines is not alone as most of the world is reeling from rising food and oil prices.

Interviewed over state-run dzRB, Golez reiterated yesterday that the government is exerting all efforts to reduce the impact of high prices on the people as inflation hit a 17-year high in August.

For the month of August, the National Statistics Office reported that average inflation was at 12.5 percent, higher than the 12.3 percent recorded in July.

Golez said the government continues to provide subsidies and other similar types of support to the masses through its “Katas ng VAT 1” program.

Billions have been spent by the government for this program, the funds of which were taken from the windfall proceeds of the value added tax (VAT) on oil.

He said the government continues to spend heavily on rice subsidies, which benefit both the farmers and the poor families that consume the rice.

The government purchases a substantial amount of rice from farmers at a premium and sells these to poor families at P18.25 per kilo, way below the average of P35 to P40 per kilo in commercial markets.

Deputy presidential spokesperson Lorelei Fajardo, on the other hand, said the government is also closely monitoring the prices of basic goods and commodities to ensure that these are at the right levels.

‘What efforts?’

However, senators questioned the government’s moves, saying its efforts were hardly felt, including the subsidies that were supposed to be directly and immediately reaching the people.

Senators Manuel Roxas II, who chairs the Senate committee on trade and commerce, and Loren Legarda, who heads the economic affairs committee, said aside from short-term solutions, they also could not see any long-term plans on the part of the administration for the country to combat rising prices.

Both senators said sufficiency of local food supply could bring down prices drastically.

Legarda also reiterated that poor people were complaining that they were not receiving the subsidies announced by the government on food, fertilizers and electricity.

“So where are these billions of subsidies from VAT revenues going? We have to know the beneficiaries of the billions of subsidies being bragged about by the administration,” Legarda said over dwIZ.

She said the government could not even exert enough pressure on big oil companies to roll back prices of fuel and other fuel products as the prices in the world market had gone down.

The two argued that said since the government had been refusing to remove or even suspend the imposition of VAT on fuel and consumer goods or agricultural products, then it must be able to show that the revenues from VAT were being spent wisely for the people.

“The government must shield its poorest citizens from the catastrophic effects of surging consumer prices,” Legarda said.

She said the government must realize that the people’s wages were not increasing as rapidly as the costs of goods and services.

She said many households have no choice but to cut down on expenses and live an even more austere lifestyle.

Crisis not yet over

Roxas said there should be no reason why the government could not keep prices of basic goods down so that every Filipino could live more comfortably.

He earlier criticized the pullout from stores of National Food Authority rice, which at P18.25 per kilo is subsidized by the government and is much lower than the regular P35 per kilo cost.

He also disputed the idea that the rice crisis was over, and called on the government to look for longer-term solutions.

Roxas said he could not understand why P70 billion was spent to import rice rather than on local agricultural development.

He also warned against blindly raising interest rates in an attempt to counter high inflation, saying this would only lead to more jobless people and further weakening of the economy.

- With Aurea Calica

Des Ferriols
Philippine Star

Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said high food prices no longer constitute a risk to inflation although it is too early to say that prices have started to ease.

Tetangco told reporters that monetary officials remain wary over the volatility in world oil prices despite the fact that prices have gone down significantly from the historic highs last month.

“It’s too early to say that inflation rate has started to ease,” Tetangco said. “But there are signs that prices have started to moderate. It’s a matter of degree.”

According to Tetangco, BSP still considers the situation risky. As such, monetary policy will remain “appropriately tight” while the Monetary Board will be monitoring prices in the months to come.

Tetangco said there are still risks, mostly from oil prices. “In food, it looks like the pressures are beginning to moderate,” he said. “We’re watching.”

Tetangco’s guarded optimism over food prices was bolstered by reports from the Bureau of Agricultural Statistics that the country’s annual farm output grew 5.4 percent in the second quarter, up from 3.9 percent in the first quarter of the year.

The increase in farm output could sustain the moderation in food prices which account for over half of the consumer price index.

In July, the inflation rate soared to 12.2 percent and the BSP said this was not the peak level monetary officials were expecting. That peak, Tetangco said, would not be seen until October.

This means the BSP may be expected to continue tightening its settings, with the market widely anticipating key policy rates to be raised by 100 to 125 basis points by the end of the year.

The BSP so far has increased its key policy rates by 75 basis points and its latest adjustment of 50 basis points last month was intended to jolt the market enough to rein in inflation expectations which officials said would react faster.

In terms of macroeconomics, any adjustment in the BSP’s key policy rates actually took at least 18 months to filter through the system by controlling money supply and dampening demand pressures.

Inflation rate, however, has been rising faster than even the most pessimistic projections and the NSO said that with the exception fuel, light and water (FLW), higher inflation rates were recorded in all commodity groups, leading to the surge last month compared with the 2.6- percent inflation rate in July last year.

Tetangco said the rise in the inflation rate was expected but the actual rate was a notch higher than the projection made by the central bank which said it expected the July inflation rate to stay within a range of 11.2 percent to 12 percent.

“Monetary policy will continue to be appropriately tight until we see a more benign outlook and manageable inflation expectations,” Tetangco said. “It’s premature or too early to say that the risks are no longer there.”

The Monetary Board will meet again on Aug. 28 and the market has been trying to gauge whether the next adjustment would be 25 or 50 basis points.

Ma. Elisa Osorio
Philippine Star

As the high cost of fuel continues to push up prices of basic goods, retailers are now required to get government approval for any upward price adjustment.

“We have to get the approval of the government,” said Steven Cua of the Philippine Amalgamated Supermarkets Association or Pagasa on the sidelines of the National Price Coordinating Council (NPCC) meeting on Friday. The government laid down the new rule at the NPCC meeting.

“We are supposed to report it (price hike),” he said.

Cua said retailers are required to justify any price increase with the Department of Trade and Industry.

But he stressed it’s not a form of price control because the DTI does not dictate prices.

“We have to tell them by how much the manufacturers raised their prices and then our other costs and how much margin we are getting,” he said.

Cua said the NPCC meeting was hastily called and came in the wake of increases in the prices of canned goods.

Trade and Industry Secretary Peter Favila confirmed the new ruling and said it is meant to keep the public informed.

“This is an effective way to prevent the public from speculating. Informing consumers of these things will prevent finger-pointing on who’s at fault,” he said.

Favila said that as of yesterday no industry has yet signified intention to raise prices. “Hopefully it will stay until the end of third quarter,” he said.

“Although the ideal setting is that prices are maintained at a level that satisfies the public, this cannot always be the scenario because there are factors that drive prices beyond what we can control,” Favila said.

He said such factors are fuel costs and the peso-dollar exchange rate.

Prices of canned goods like luncheon meat, sardines and corned beef increased this month. Prices are expected to rise further by the end of the month as the cost of tin plates continues to rise due to high demand in China ahead of the Beijing Olympics.

The current retail price of canned sardines ranges from P10.50 to 11.50 per 155-gram can.

“While prices of majority of basic goods such as chicken, pork, milk, sugar and flour have remained stable during the past three months, the rising cost of tin plates in the world market has inevitably led manufacturers of canned products to adjust their prices by up to P0.35 to P0.40,” Favila said.

Meanwhile, prices of some basic goods – including chicken, pan de sal, bangus (milkfish) and sugar – are expected to remain stable at least until the end of the month. The price of rice being sold by the National Food Authority still ranges from P18.25 to P25 per kilo.

Canned goods’ prices still up

The price of canned goods is expected to remain high until September as prices of tin plates are still unstable.

“The demand of China has affected the price of tin plates. We thought it will end after the Olympics but because of the earthquake we are having second thoughts,” Henry Tañedo, chairman and president of the Tin Can Manufacturers Association of the Philippines, said.

The Beijing Olympics is in August but Tañedo said the demand will not slacken because of the massive re-construction in the aftermath of a powerful earthquake in Sichuan province recently.

Tañedo said they hope to get a clearer picture by the last week of July.

“The order for the fourth quarter will come at the end of July. The price will depend on the demand,” he said.

The price of sardines, corned beef and luncheon meat will increase by another six to seven percent toward the end of the month.

“There will be two increases in the prices of canned food products this month because some manufacturers opted to adjust their prices twice instead of implementing one big price increase,” Tañedo noted.

According to Tañedo, the price of tin cans went up by 12 to 15 percent this month as the cost of raw materials continued to rise.

Rainier Allan Ronda
Philippine Star

The Light Rail Transit Authority (LRTA) will not seek a fare increase for the LRT, and no fare hike is expected for the Metro Rail Transit (MRT) despite the rise in fares for buses, jeepneys and taxis.

Melquiades Robles, LRTA administrator, said that although a fare increase could boost revenues and raise funds for maintenance and operating expenses of the agency, they would abide by President Arroyo’s policy of maintaing current fares for LRT lines 1 and 2, and even line 3 or the MRT.

“There has been a need for an increase for a long time. But it has been the policy of the President to help our commuters,” Robles said.

He said the government has effectively subsidized fares to ensure that commuters will have access to an efficient, convenient, environment-friendly mode of transportation amid the rising costs of other public transport.

“In fact, every passenger is subsidized by the government by P30 to P40 per ride,” Robles told reporters yesterday.

He said the government has been consistent in the provision of subsidies for food, electricity and transportation.

For his part, Roberto Lastimoso, MRT general manager, said they have a pending fare hike petition which they file every year before the Office of the President that they do not expect to be granted.

Closing the loop

Meanwhile, the actual construction work on the P6.4-billion LRT Line 1 north extension project that will link the line to the EDSA-bound MRT started yesterday with soil testing conducted by project contractor DMCI-First Balfour consortium.

Robles said they are confident of completing the project in about three years or by May 2010.

“I’m pleased to announce that today, the actual construction work has started after the selection of the contractor for the civil works and other components of the project was done with the completion of a transparent bidding process,” he said. “Our target is for the commissioning of this phase by May 2010.”

Robles, along with other LRTA officials and engineers of the DMCI-First Balfour consortium, witnessed the initial drilling activities for the soil testing at a portion of EDSA near the Monumento Circle in Caloocan City where concrete pillars for the elevated aqueduct of the elevated rail line will be built.

Engineer Edilberto Palisoc, DMCI-First Balfour project manager, said the soil testing was done while the design and construction plan of the project was being finished.

DMCI-First Balfour was the winning bidder for the project’s Packages A and B, which involve the civil works for the railway and station construction of the project.

The P6.4-billion project, touted as the “Closing the Loop” project, will connect the LRT Line 1 and the MRT at the Monumento Station in Caloocan and the North Avenue Station in Quezon City through an entirely elevated railway spanning a 5.4-kilometer stretch of EDSA.

The project will include the construction of three rail stations at the Balintawak interchange, Roosevelt Avenue, and North Avenue, which include plans to develop a park-and-ride complex at one of the stations to enable private vehicle owners to park their cars and take the LRT.

“This is very timely. People are now turning to mass rail transport with fuel prices going up weekly. This is the government’s answer to rising fuel costs,” Robles said.

He said the extension project was expected to increase the average daily passenger volume for both LRT Lines 1 and 2, and the MRT, which government is planning to buy out from the Metro Rail Transit Corp.

Robles said passenger volume at LRT 1 and 2 was increasing steadily with more and more commuters taking mass transport as a result of increasing fares of jeepneys and buses, which are slower.

“Right now, our average ridership is 420,000 on weekdays. When I started here as LRTA chief in 2004, it was around 260,000 passengers a day,” Robles said.

He said LRT 1 and 2 are ready for an increase in passenger volume since they have maximum capacities of 600,000 passengers a day.

Elisa Osorio
Philippine Star

Prices of canned goods including corned beef, sardines, and luncheon meat are expected to rise by six to seven percent by the end of the month on the back of higher tin costs.

“There will be two increases in the prices of canned food products this month because some manufacturers opted to adjust their prices twice instead of implementing one big price increase,” Henry Tañedo, chairman and president of Tin Can Manufacturers Association of the Philippines, told The STAR in a telephone interview.

He said the cost of tin plates is rising steadily due to the surge in demand in China ahead of the Beijing Olympics.

“HRCs (hot rolled coils) are very expensive because of the great demand produced by the Beijing Olympics,” Tañedo said.

“We cannot do anything. Tin plates are all imported and the peso has already dropped almost 5 percent,” Tañedo noted.

“We really tried not to increase our prices but because of several factors it has become impossible,” he said.

The prices of tin plates have gone up by 41 percent since the beginning of the year.

The price of 202 cans, which are used for packaging sardines, is P3.40 from only P3.05 early this year.

Trade Undersecretary Zenaida Maglaya confirmed that during the first week of July, the prices of two brands of sardines went up by P0.35 to P0.40.

“Only 555 and Mega sardines adjusted the prices because the cost of tin cans went up,” Maglaya said. “The price of processed meat like corned beef and luncheon meat also increased,” she said.

Maglaya said other brands might follow. “It’s stiff competition. Some would like to wait and see.”

Francisco Alcuaz Jr. and Frank Longid
Manila Standard

JOLLIBEE Foods Corp. chairman Tony Tan Caktiong said the fastest inflation in 14 years is making more higher-income customers try the country’s biggest fast-food chain even as lower-wage clients cut back on visits.

“Our field people joke that the clientele now are all in barong,” Tan said in an interview.

“I’ve started to get comments from my friends: This product is good, this needs improvement. You don’t hear these comments during good times. The higher segment is coming down.”

Jollibee, which outsells McDonald’s Corp. in the Philippines, will expand its new lower-priced restaurant unit that appeals to Filipinos made poorer as oil and rice costs boosted inflation to 11.4 percent in June. The Philippines imports almost all its oil and is the world’s biggest importer of rice.

“Inflation affects Jollibee more on the cost side than the demand side,” Jojo Gonzales, head of research at Philippine Equity Partners Inc. in Manila, said in a telephone interview.

“Some people are slipping into their market. Some are falling down-market but they hope not to lose those by offering more value meals and Manong Pepe,” the lower-priced chain Jollibee started last year.

The company’s seven brands, including Jollibee, Chowking and Red Ribbon, had 1,639 outlets as of March, 179 of them in the US, the United Arab Emirates, China and other overseas locations. Tan led the purchase of restaurant chains, including Shanghai-based Yonghe King. The acquisition of Beijing-based Hongzhuangyuan will add another 33 stores to the company’s network.

Tan yesterday became a board director of the Philippine Long Distance Telephone Co., joining other business giants such as Manuel Pangilinan, Napoleon Nazareno, Oscar Reyes, Alfred Ty, Albert del Rosario and Pedro Roxas.

Jollibee shares rose 1.5 percent, matching the gains of the benchmark Philippine Stock Exchange Index, to close at P34. Yesterday’s climb trimmed the food retailer’s loss this year to 35 percent.

Quickening inflation prompted the government to cut its economic growth estimate half a percentage point in May to a range of 5.7 percent to 6.5 percent.

The economy expanded 7.2 percent last year, the fastest in 30 years. But price increases would accelerate further in the third quarter, central bank Gov. Amando Tetangco said July 4.

Jollibee’s sales growth would slow from last year’s 13 percent because of oil and rice prices, chief financial officer Ysmael Baysa said June 27.

He said the company was raising prices as much as 2 percent every two months, which would not “shock consumers,” and cutting costs by using electric fans and energy-saving devices.

The company would probably scale back its plan to almost triple capital spending to P6 billion this year from P2.06 billion last year, Tan said. It would probably delay its plan to expand three commissaries.

“2007 was a very good economic recovery,” Baysa said.

“Based on that recovery, we would run out of production capacity sooner than we expected, so we tried to accelerate expansion. Now volume is not as strong again, so in a way we’re going back to the original plan.”

Bloomberg and Roderick T. dela Cruz

Cielito Habito
Philippine Daily Inquirer

MANILA, Philippines–Our inflation rate has gone double-digits–something we haven’t seen since the early 1990s–and we haven’t seen the worst of it yet. While rapid price increases hit all of us, the sad fact is that it hits the less fortunate even harder. This is even more so now, with food prices rising the fastest, and we all know that the poorer one is, the larger the portion of one’s income that is devoted to food and other basic needs.

Is there any relief in sight? Since the current inflation episode traces to surging oil and food prices globally, the question really boils down to what’s in store for oil and food prices. I wrote recently on the oil price debate (“Ready for $200 oil?” NFL 5-26-08), and there are more angles to the debate that we can further explore. There is somewhat less divergence of views on where food prices are heading. The overall picture I get doesn’t look very pretty.

Supply and demand

When crude oil prices began rising last year from the $60-$70 a barrel range that the world had begun to get accustomed to, one analyst wrote: “With global economic growth obviously slowing, demand for oil is sure to weaken in its wake, suggesting softer prices to come. While the $100 level may yet be achieved, it’s not likely to last long. We expect an average of $66 next year… $2 below the 2007 average…”

How wrong he was, of course, and yet he was far from alone in his optimistic assessment then. Even now, there continue to be those who forecast oil prices to collapse in the foreseeable future, arguing that oil prices have changed much more drastically than the real supply and demand situation has. The implication is that the recent oil price surge must simply be the product of excessive speculation or outright manipulation, rather than fundamental supply and demand forces.

But this question deserves a closer look. Has the supply and demand situation indeed not changed that much to warrant the recent oil price movements? Isn’t the market reflecting rational responses not just to the current supply-demand (im)balance, but to what it is actually shaping up as well?

Dominated markets

It has been asserted that it took 125 years for the world to consume the first trillion barrels of oil, but at the rate we are now going, we will use the next trillion within 30 years. And it’s very easy to understand why. With zooming economic growth from just two countries (China and India) that account for well over a third (37 percent) of humanity, demand for oil is outstripping supply. Add to that yet another populous nation, Indonesia, where car sales reportedly zoomed 24 percent last year despite rising oil prices. One sees how surging world oil demand is actually being fueled (pardon the pun) by just a few major players. And because of their huge populations, not even an economic slowdown is likely to dramatically curtail their oil appetites.

On the supply side, world crude supplies are similarly dominated by a few players. Trouble is, the supply outlook from the most prominent ones (Saudi Arabia, Iran, Iraq, among others) cannot be reliably anticipated, for reasons I need not explain. And current American saber-rattling against Iran won’t help the situation any.

And then there is the raging debate about whether the world has reached or is soon to reach “peak oil,” and therefore could anticipate supplies to slow down and eventually decline. But whether or not one believes that there are still huge reserves of oil under the ground or under the sea, few disagree that the remaining reserves are becoming more technically difficult, and thus more costly, to extract. Thus, even if the oil was there, these remaining reserves will only be economically feasible to extract at extremely high prices, the likes of which we are seeing now.

Food prices

So much about oil; what about food? It was a global food price spike, after all, that pushed domestic food prices to double-digit growth as early as three months ago. As many of us predicted, world food prices have since moved down relatively quickly. It was easy to see that the heavier planting by farmers encouraged by higher prices (something also attested to by farmer leaders I’ve talked to) would reverse the price climb just as promptly. So the direction we can expect sooner or later is downward.

But don’t rejoice just yet. The UN Food and Agriculture Organization (FAO) warns that we should not expect food prices to return to their former low levels, for three reasons. One, costs of farm inputs have escalated, and many of them in fact come directly from petroleum (e.g., fertilizers, pesticides). To the extent that high oil prices are here to stay, as we argue above that they indeed are, then food production costs, and therefore prices, will still be higher than before. Two, the food-surplus countries are increasingly using up their own production due both to rising incomes and populations, leaving less for them to export. And three, the rest of us who are net food importers likewise need more and more food to support our growing economies and populations.

Times have indeed changed. And the call of the times points to making some fundamental changes in our consumption habits, and ultimately, our lifestyles. And as we do, let us not forget about the growing numbers among us who do not even have much of a lifestyle to speak of.

Michelle Remo
Philippine Daily Inquirer

MANILA, Philippines—The prices of services and goods consumed by an average Filipino household went up by 11.4 percent in June from a year earlier—the fastest rate recorded in 14 years—due largely to the substantial increase in the cost of rice and other food products, the National Statistics Office reported Friday.

The price of rice soared by 43 percent because of growing demand and increased costs of inputs. This means that the rice a consumer bought for P100 in June last year may be had for P143 last month.

Prices of food products included in the Filipino consumer basket rose by 17.4 percent. This means food products that had cost P100 in June last year, cost P117.4 last month.

“June inflation rose to a double-digit on account of the unprecedented jump in world oil prices,” Governor Amando Tetangco Jr. of the central bank, Bangko Sentral ng Pilipinas (BSP), told reporters. “As a result, domestic pump price increases triggered large price buildup across wide commodities and services groups.”

The June inflation rate exceeded the BSP forecast of 10.4-11.2 percent and the 9.5 percent recorded in May.

For the January-June period, inflation averaged 7.6 percent, way above the government’s full-year target of 3.0-5.0 percent.

Core inflation, which excludes prices of volatile food and energy items, rose to 6.6 percent in June from 6.2 percent in May.

The faster increase in overall inflation is largely blamed on the relentless rise in the price of oil. Global crude oil prices reached $145 a barrel for the first time Thursday.

The BSP warned that commodity and oil prices were still on their way up and would peak in the third quarter.

It said inflation would start to moderate in the fourth quarter and throughout 2009.

Benjamin Diokno, economics professor at the University of the Philippines, said rice had been gravely affected by rising oil prices.

“Oil dependency is a major cause for increase in prices,” Diokno said in an interview with the Philippine Daily Inquirer. “In the case of rice, prices have increased significantly because 40 percent of inputs are oil-based, such as fertilizers and pesticides.”

Diokno said the increasing global demand for rice was also to blame. He said the populations of India and China—both rice-eating countries—were growing significantly. The two countries together have a headcount of around 2.5 billion.

Because the Philippines is a rice importer, one of the biggest in the world, it is vulnerable to price increases in the world rice market.

Diokno warned that the increase in food prices could drive more people to privation, rubbing salt on the wounds of those who already are living below the poverty line.

He noted that food accounted for 60 percent of a poor household’s consumption.

Rice alone accounts for 20 percent of a poor family’s consumption, he noted.

In 2006, 32.9 percent of the population, or 27.6 million Filipinos, lived below the poverty line, based on the latest report of the National Statistical Coordination Board. The poverty incidence in 2006 was worse than in 2003, when there were only 23.8 million poor Filipinos, roughly 30 percent of the population.

“Poor Filipinos are now faced with the double whammy of higher food prices and less opportunity for work,” Diokno said.

He noted that the unemployment rate, or the proportion of jobless Filipinos to total labor force, stood at 8 percent in April from 7.4 percent in the same month last year.

He suggested that the government implement projects that would improve irrigation and infrastructure in rural areas. This way, the government would provide more jobs and help improve farm production.

Malacañang assured the nation Friday that it would continue to come up with measures to help people cope with rising oil and food prices.

Cabinet Secretary Ricardo Saludo said the current inflation surge only showed the importance of “government-sectoral cooperation to curb price hikes.”

At present, the government plans to use P4 billion generated from the value-added tax on oil to help destitute electricity users and poor students in their struggle to cope with rising prices, Saludo said.

In particular, jeepney drivers would be given assistance to convert their engines from diesel into those that run on liquefied petroleum gas.

The government, through the Department of Agriculture, would also help farmers boost rice and food production through a P43-billion program for providing inputs and facilities.

“We must join hands to rein in prices,” Saludo said in a statement.

Deputy presidential spokesperson Lorelei Fajardo said the central bank was studying options to help curb the rise in inflation.

Fajardo urged manufacturers to be “sensitive” to the consuming public and warned that government “will not tolerate hoarders and vultures who will prey” on them.

Inflation rates for other commodity groups were recorded as follows: food beverage and tobacco, 16.5 percent, up from 13.6 percent in May; clothing, 4.2 percent from 4 percent; housing and repairs, 4.3 percent from 4 percent; services, 9.9 percent from 7.8 percent; and miscellaneous items, 2.9 percent from 2.7 percent.

Inflation for other food products were as follows: corn, 34.3 percent in June from 27.1 percent in May; cereal preparations, 16.6 percent from 15.3 percent; fish, 10.8 percent from 9.6 percent; fruits and vegetables, 12.5 percent from 10.1 percent; meat, 11.4 percent from 10.4 percent; and miscellaneous foods, 8.3 percent from 7.6 percent. Dairy products and eggs registered a slowdown, at 13.5 percent and 7.5 percent from 13.7 percent and 7.7 percent, respectively.

The central bank, which has inflation as the target of its policies, hinted it was prepared to take action, such as by raising again its interest rates at the next meeting of its policymaking Monetary Board.

The BSP’s overnight borrowing rate currently stands at 5.25 percent and its overnight lending rate at 7.25 percent.

“Demand pressures will moderate as monetary policy is generally tightened,” BSP Governor Tetangco said.

An increase in the BSP’s interest rates helps curb inflation. With a higher borrowing rate, banks would get more in terms of yield when they deposit their money with the BSP. With reports from Christine O. Avendaño, Agence France-Presse, Reuters; with editing by INQUIRER.net