• SC ruling can affect inflation outlook

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    The Bangko Sentral ng Pilipinas (BSP) said on Monday that its outlook on the inflation rate may change depending on the Supreme Court’s decision on the case regarding Manila Electric Co.’s (Meralco) power rate adjustment.

    BSP Deputy Governor Diwa Guinigundo said that the central bank’s earlier inflation outlook for 2014 and 2015 “will have to change,” if the High Tribunal finally rules out the power rate adjustment by Meralco.

    The BSP earlier announced a higher inflation rate outlook for 2014 (4.5 percent) and 2015 (3.2 percent), still within its 3-percent to 5-percent target band but higher compared to 2013’s average inflation rate of 3 percent. He said that the BSP’ broader outlook on inflation already factored in the P4.15 per kilowatt-hour increase in Meralco’s power rate, which was announced in December 2013.

    Upon the approval by the Energy Regulatory Commission, the power distribution utility was supposed to collect in three tranches the higher transmission charges in December, and in February and March this year.

    However, a temporary restraining order (TRO) from the High Tribunal stopped Meralco from implementing the said rate hike. Meralco has warned the public that because of the TRO, generation companies might refuse to sell electricity to them that will result in rotating blackouts.

    On the other hand, an economist at Standard Chartered Bank said that the inflation rate this year may rise to 3.9 percent, still on the account of higher power rates.

    “We expect inflation to rise this year to 3.9 percent from 3 percent in 2013, triggered by higher food and energy inflation,” said Standard Chartered economist Jeff Ng.

    Ng said that inflation will be driven by a weaker peso, and higher food and energy inflation but will likely be a demand pull because of the strong economic performance of the Philippines, supported by remittance growth.

    The economist said that the country may also resort to rice importation “in the short term due to the typhoon impact on rice production,” referring to Super Typhoon Yolanda.
    “We also see some impact from the storm disruption from the typhoon over the short- time horizon. This will likely push up inflation,” he said.

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