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By Darwin G. Amojelar, Reporter
EXTREMELY expensive oil and food could bring the
country’s inflation rate to average near double-digit levels and
the economy to slump this year, a market research firm warned
Thursday.
In a research note, First Metro Investment Corp.
and the University of Asia and the Pacific’s Capital Markets
Research Center economist Vic Abola said that if oil prices break
$150 a barrel and hits $165 a barrel, then high-end gasoline would
reach P71 a liter while diesel could well hit P60 a liter.
“These ‘extreme’ outcomes would then add
another 0.7 percent to the average inflation rate projected of 8.8
percent, and bring it to 9.5 percent for 2008,” Abola said.
Abola said the Philippine economy, as measured
by the country’s gross domestic product (GDP), may grow 4.5
percent, assuming the government is unable to offset part of this
with some timely stimulative action.
At present, the projected annual average price
of West Texas Intermediate crude oil is $122.95 a barrel, or a
68.9-percent increase from last year.
Abola said the projected increase for oil price
this year is 70 percent, which could result in a 4.6-percent annual
inflation rate and a decline in GDP of 2.8 percent. “Adding these
to the rates achieved in 2007 would tend to “predict” inflation
rate of average 7.4 percent and GDP to still grow at 5.4 percent,”
Abola said.
The economy last year grew 7.3 percent, while
inflation dipped to a multiyear low of 2.4 percent.
In May, inflation rose at a nine-year high of
9.6 percent and last month was projected to hit 11 percent. The
economy also grew at a slower pace of 5.2 percent in the first
quarter of the year.
In the first five months this year, inflation
rose 6.9 percent, higher than the Development and Budget
Coordinating Committee’s target of between 3 percent and 5
percent.
With the higher-than-expected inflation, the
policy-making Monetary Board was forced to hike its key interest
rates by 25 basis points to 5.25 percent and 7.25 percent for the
overnight borrowing and lending windows, respectively.
Earlier, Acting Socioeconomic Planning Secretary
Augusto Santos called the present high inflation as “imported.”
Santos said other countries in the region also
suffer from high inflation such as Indonesia with 7.6 percent;
Thailand, 4.99 percent; Singapore, 6.59 percent; South Korea, 3.7
percent; China, 5.16 percent; Vietnam, 16.4 percent; and Malaysia,
2.5 percent.
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