NEDA Director General and Socioeconomic Planning Secretary Romulo Neri said yesterday the government remains on track in its 2003 inflation target of 4.5 percent to 5.5 percent.
"The 2.7-percent inflation rate recorded for January is in line with the 4.5-percent to 5.5-percent target for this year," Neri said.
The government had expected inflation to hover at around 2.6 percent to 2.8 percent last month. Bangko Sentral ng Pilipinas (BSP) Governor Rafael B. Buenaventura said the January inflation rate, which was generally flat from December, provided the BSP more leeway in its monetary policy.
"It is good news for us because inflation is a principal concern we’ve always had. So this gives us more time and flexibility," Buenaventura said.
The BSP chief previously said he expected prices to have risen between 2.8 percent and 3.2 percent in January, due to increases in oil and food prices, while the NEDA said the figure may hit 2.8 percent.
The country’s inflation rate has been below three percent since July 2002.
The BSP has kept its borrowing rate at seven percent and its lending rate at 9.25 percent since March 2002.
The government statistics office said the inflation rate in Metro Manila hit 3.2 percent in January from 2.9 percent in December.
However, the consumer prices in largely-rural areas outside the capital fell to 2.4 percent in January from 2.6 percent in December.
By commodity group, fuel prices recorded a notable 8.3 percent hike as the average retail prices of oil products rose to P16.48 per liter last month from P13.73 per liter in January last year.
Neri said this was due to increases in the international prices of oil coupled with the depreciation of the peso against the dollar. Prices for benchmark Dubai oil had hit $28.02 per barrel in January from $18.48 per barrel in the same period last year while the peso weakened to P53.564 to a dollar from P51.41 a year ago.
Water prices, on the other hand, rose by 11.6 percent following the adjustment in the basic water rates charged by Manila Water from an average of P9.97 per cubic meter to P14.42/cu.m. in January.
Neri said higher prices of rice and fish were also noted. Among food items, there were upticks in the prices of fish and rice, particularly galunggong which went up to P85/kg last month from P75/kg a year ago.
While prices of NFA, premium and fancy rice were stable during the month in review, that of special rice registered a 10 percent surge compared to prices a year ago.
Neri said they expect inflation to trend upwards in the coming months. "We expect inflation to move upwards in the coming months due to the impact of the US-Iraq conflict on oil prices and the peso-dollar rate," Neri said.
He said policies that will keep food prices stable through El Nino mitigating measures will be vital in managing inflation within the official forecast, given the impending increase in prices of non food items.