(UPDATE) Inflation in 2014 to settle below 5 pct

MANILA, Philippines (Xinhua) - Despite concerns over higher food prices due to supply problems, Philippine government officials and experts said Friday that inflation for 2014 will still settle below 5 percent.

The Bangko Sentral ng Pilipinas (BSP)--the country's central bank--and the National Economic and Development Authority (NEDA) said full-year inflation will average 4.4 percent, still within the government's target of 3 to 5 percent for 2014. Inflation in the first half of the year averaged 4.2 percent.

Philippine government officials, however, said they continue to be mindful of the risks to achieving the inflation target. NEDA said these risks include weather disturbances, pests and diseases, pending petitions for adjustments in utility rates and excess liquidity.

"The Philippine central bank will adjust policy levers as appropriate to keep a lid on inflation and ensure financial stability pressures are in check," said BSP Governor Amando Tetangco, Jr.

In June, faster growth in food prices pushed up inflation rate at the higher end of the target. Socio-economic Planning Secretary Arsenio Balisacan said the sharp increase in rice prices due to supply tightness caused food prices to rise by 7.8 percent last month.

"In the short term, the interventions can focus on ensuring supply adequacy by allowing sufficient levels of imports to augment local production of rice and other key commodities," said Balisacan, who is also NEDA Director-General.

Economists said addressing food supply issues will be key to tempering inflation for the rest of the year. Ateneo de Manila University's Alvin Ang said food prices will remain high from the July to September period due to storms which could reduce output.

Depending on the severity of the El Nino weather phenomenon, University of the Philippines economist Benjamin Diokno said inflation this year could settle at 4 percent if the government is able to prop up food supply through imports and higher food production.