Food prices stabilizing by Aug., oil by Oct., expert says

ABS-CBN News

Posted at Jun 09 2008 10:04 AM | Updated as of Jun 09 2008 06:04 PM


By CAI U. ORDINARIO

Business Mirror Reporter
 
An economist from the University of Asia and the Pacific (UA&P) projects that Filipinos may have already seen the worst of high food and oil prices and would see stable price tags by August and October.

Dr. Victor Abola, director of the UA&P Strategic Business Economics Program, said based on rice-price cycles for 1995 to 1996 and 1998 to 1999, he believes food prices would stabilize in the next two months.

State-owned think tank Philippine Institute of Development Studies (PIDS) in a 2000 study stated that total rice usage in the Philippines began to regularly outstrip domestic rice production in the 1990s, where rapid price increases were noted, particularly in 1995 to 1996 and 1998 to 1999.

“The pickup in the pace of inflation is actually sowing the seeds for self-adjustment, as aggregate demand slows down, in the face of lower consumer purchasing power,” Abola said in a statement.

“Based on the pattern of extraordinary rice-price cycles for 1995-96 and 1998-99, it is likely that food prices will stabilize by August,” he added.

Further, Abola said that oil prices in general are also seen to continue to rise by October this year. However, the UA&P economist said that by around November, oil prices may temper but will not exhibit a dramatic slide.

“The coming months are likely to post inflation rates fairly similar to that of May. An actual slowdown will happen only when food prices end its price spiral cycle,” Abola said.

On the other hand, University of the Philippines economist Felipe Medalla said the 9.6 percent inflation rate may already be deemed a slowdown based on the month-on-month increase in prices.

The former socioeconomic planning secretary said that the monthly increase in inflation growth was only 1.5 percent in April to May. In the March to April period, the growth rate was around 2 percent.

If this keeps up, Medalla said inflation may even grow by 1 percent in May to June, and 0.5 percent in June to July. Using the inflation in May of 9.6 percent, inflation may hit 10.6 percent in June and 11.1 percent in July.

Medalla noted that the slower increase in month-on-month inflation will prevent the country from being thrust into a double-digit inflation year this year.

Earlier, the National Statistics Office (NSO) data showed that while prices of all commodity posted increases, inflation for food, beverages and tobacco (FBT), which posted a 13.7-percent increase and was the biggest cause for the surge in prices in May.

The NSO said the annual inflation rate for food alone soared to 14.3 percent in May from 12 percent in April. This was due to double-digit increases in rice prices which increased by 31.7 percent, and corn prices with a 27.1 percent increase.

The annual inflation rate in the National Capital Region (NCR) increased to 8.3 percent in May from 7.4 percent in April due to higher prices in FBT, services and the miscellaneous items index.

In areas outside the NCR, annual inflation rose to 10.2 percent in May from 8.7 percent in April. All the commodity groups registered higher annual inflation rates except the miscellaneous items index.