Inflation pressures in PH expected to build up

Published by rudy Date posted on March 1, 2011

MANILA, Philippines—The Philippines has been cited as one of the emerging Asian economies where price pressures are building most rapidly as rising incomes in the region boost demand and as prices of imported oil and other commodities post faster rates of increase.

Japanese investment bank Nomura said in a research note that rising price pressures in developing Asia were expected, given a host of local and global factors.

“We expect our measure [the inflation pulse] to continue to climb in most countries,” Nomura said, citing the rise of commodity and property prices and healthy growth rates in the region.

While the latest annual inflation rate for the Philippines stood at a relatively benign 3.5 percent in January, Nomura said the “inflation pulse” for the country was much higher at 8.2 percent.

Nomura said the inflation pulse—which it said could be a better gauge of the buildup of price pressures than the annual inflation rate—was measured as the year-on-year increase of a certain three-month consumer prices average.

As such, the 8.2-percent rate for January for the Philippines reflected the growth in prices from the November 2009-to-January 2010 period to the same period in 2010 and 2011.

“Our pulse measure has risen most rapidly in Hong Kong, India, Malaysia and the Philippines,” Nomura said.

Economists said inflation has become a common issue among developing Asian countries this year given the rapid growth in the region as incomes rise and foreign portfolio inflows come in.

In the case of the Philippines, the economy grew 7.3 percent last year to register its fastest pace of expansion in 34 years. In 2009, when most industrialized nations contracted, Philippine GDP managed to expand by 1.1 percent.

The Bangko Sentral ng Pilipinas earlier said that despite the country’s accelerated growth and while prices were rising, inflation has remained within comfortable levels.

The 3.5-percent inflation in January was within the official target of between 3 and 5 percent for this year, the central bank said.

BSP Deputy Governor Diwa Guinigundo earlier explained that consumer prices in the country were so far rising by a tolerable pace because demand pressures were being offset by rising supply of goods and services.

Guinigundo said that while rising household incomes were beefing up demand, increasing corporate profits were also causing investments and productivity to rise. The resulting increase in supply was partly offsetting the impact on prices of growing demand, he explained.

Meantime, although the economy has consistently grown over the years, the resulting increase in incomes was not being felt across all income groups.

Economists said poverty incidence in the country remained significant, noting that the benefits of growth were not trickling down to the poor. Poverty incidence grew to 26.5 percent in 2009 from 26.4 percent in 2006. –Michelle Remo, Philippine Daily Inquirer

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