Inflation won’t rise soon despite soaring oil prices – NEDA

Despite soaring oil prices in the Middle East, government economic planners are confident that the national inflation rate will not rise immediately, provided the transport sector will not clamor for a hike in local fares.

According to the National Economic and Development Authority (NEDA), local prices are being monitored closely for possible adjustment of the government’s inflation and interest rate projections.

NEDA and the Bangko Sentral ng Pilipinas (BSP) said they have agreed to review the numbers and consider the country’s economic scenario in case oil prices stay at the $21/barrel level.

NEDA Director General Dante Canlas told reporters that the economic agency is not expecting any sudden uptick in the national inflation rate primarily because of country’s declining dependence on imported crude oil, particularly in power generation.

"We are not worried yet," Canlas said. "But we are watching it closely in case it goes up further and results in a corresponding increase in domestic prices." On the other hand, BSP Governor Rafael B. Buenaventura said even the worst case scenario will not be as bad as people expect and will possibly bring the country back to its original estimates at the beginning of the year with the full-year average inflation at 5-6 percent.

"But this morning (during the Monetary Board meeting), Dante and I have agreed to look at the numbers again," Buenaventura said, adding that "we are going to look at the various scenarios with oil prices at $21 or $24 or $27 per barrel."

Oil prices soared to a six-month high the other day as a barrel of benchmark sweet crude jumped to $27.7, the highest since oil prices spiked on Sept. 11 following the terrorist attacks on the US which responded by stockpiling oil.

In the Philippines, consumers have been warned to brace themselves against a possible 90-centavo per liter increase in oil prices by the so-called Big Three oil companies, namely Shell, Caltex and Petron.

This would come in the wake of the 50-centavo per liter increase imposed by oil companies also this month and the proposed increase in electricity rates in the franchise areas covered by the Manila Electric Co. (Meralco).

According to Canlas, however, the overall impact would not be known immediately since oil prices account for only a portion of aggregate production which includes the prices of raw materials, power generation, transport, storage, wages and the like.

"We will have to see how this impacts the overall picture. There are ways we can prevent runaway inflation because there are aspects that are within our control," Canlas said. – Des Ferriols