The National Statistics Office (NSO) reported yesterday that consumer prices rose 3.3 percent in November from a 3.1-percent rise in October, due to an increase in prices of food, beverages and tobacco.
Analysts warned that inflationary pressure is expected to build up in the new year on increased spending ahead of presidential and national elections in May.
The average inflation for the first 11 months of the year was at 3.1 percent, below the government’s target of 4.5 percent-5.5 percent for the whole of 2003.
An increase in the price of animal feed, unfavorable weather conditions and a rise in the prices of food pushed up the inflation rate, the statistics office said.
Inflation in Metro Manila went up to 5.1 percent in November from 4.9 percent in October.
In the provinces, prices edged up to 2.7 percent from 2.4 percent a month ago.
The Bangko Sentral ng Pilipinas (BSP), which made inflation its main criterion for interest rate policy, said it saw no impact on rates from the latest rise since the outlook remained benign.
"No impact, given that it is within the target range and the expectation that looking ahead we see benign numbers," BSP Governor Rafael B. Buenaventura said.
Looking ahead, though, some economists said there was a risk of a sharper rise in prices next year if the peso stayed weak and as traditional election-time spending fed through to stronger consumer demand ahead of next May’s national polls.
"We expect inflation to move higher in December," said AB Capital economist Jose Vistan.
"We see average inflation for 2004 higher at around five percent versus a projected 3.1 percent average this year. Election-related spending, political and economic uncertainties would add to inflationary pressures,"he added.
The peso fell to a record low of 55.85 against the dollar last week, driven by concerns that a political novice could win the presidency next year. A weaker currency raises the cost of the country’s energy and other imports.
The peso has since strengthened on the back of dollar remittances from millions of overseas Filipino workers (OFWS) and was trading at 55.29/33 on Friday morning, unaffected by the inflation result.
The BSP has kept the overnight borrowing rate at 6.75 percent and its lending rate at nine percent, the lowest levels in more than 11 years, since cutting the key rates by 25 basis points in July.
Buenaventura said earlier this week that the central bank would need to respond with a policy tightening if the US. Federal Reserve hiked its rates next year.
A rate rise should help shore up the peso, but it would also jack up the cost of servicing the country's huge debt and could dampen a fledgling economic recovery.
Figures out yesterday showed exports had risen at their fastest pace in seven months in the year through October while gross domestic product data last week confirmed the economy had rebounded in the third quarter after a brush with recession earlier in 2003.
Song Seng Wun, regional economist at G.K. Goh Securities, said November inflation was a touch higher than his forecast but was not yet a major cause for concern.
"We see inflation averaging between 3.5 and four percent next year which is still lower than historical average. There’s still leeway for the central bank to keep policy rates stable," he said. –With Reuters, AFP