Thursday, August 28, 2008

Philippines Central Bank Raises Rates Again In August

The Philippine central bank raised its benchmark rate to tame inflation, saying the economy is ``strong enough'' to withstand a third increase in borrowing costs since June. Bangko Sentral ng Pilipinas increased the rate it pays banks for overnight deposits by 0.25 percentage point to 6 percent, Governor Amando Tetangco told reporters in Manila today.

Q2 2008 GDP

Philippine economic growth eased to a three-year low of 4.6 percent in the second quarter as consumer spending waned, the government said today. Inflation may have accelerated to as much as 12.6 percent in August from 12.2 percent in July, and may exceed the central bank's targets for 2008 and next year, Governor Tetangco said today. Bangko Sentral last month raised its 2008 inflation forecast to a range of 9 percent to 11 percent, from 7 percent to 9 percent. The government this month lowered its 2008 growth target for a second time this year to between 5.5 percent and 6.4 percent, which would be a slowdown from the 7.2 percent expansion in 2007.

Remittances from the more than 8 million Filipinos abroad, or about a tenth of the population, have continued to support the $118 billion economy this year as faster inflation eroded domestic consumer spending. Consumer spending growth slowed to 3.4 percent in the second quarter from 5.2 percent in the previous three months. Government spending, which accounts for a tenth of the economy, fell 5.1 percent.

Exports, which make up two-fifths of the economy, added 7.7 percent from a year earlier, after a 6.1 percent drop in the first quarter. Services climbed 4.3 percent, slower than the 6.5 percent pace in the previous three months.

Wednesday, August 20, 2008

Philippine Government Cuts Growth Forecast

The Philippine government cut its 2008 economic-growth forecast today for the second time this year as faster inflation hurt consumption, adding pressure on the government to boost spending on food and fuel subsidies to the poor. Gross domestic product is now expected to expand between 5.5 percent to 6.4 percent this year, down from an earlier forecast of as much as 6.6 percent, according to Economic Planning Undersecretary Augusto Santos.

Philippine stocks and the peso fell on concern the government may expand subsidies for the third of the 96 million population that lives on less than a $1 a day, widening the fiscal deficit.

President Gloria Arroyo in May pledged to boost investment and lift spending on rice and other subsidies to help Filipinos cope with soaring prices, abandoning her plan to balance the budget this year. Finance Secretary Gary Teves has said the government may post a 2008 deficit of 40 billion pesos to 75 billion pesos.

The $118 billion economy expanded 5.2 percent in the first three months of 2008, the slowest pace in six quarters. Inflation in the Philippines accelerated to 12.2 percent last month, the fastest pace in more than 16 years, crimping consumer spending that makes up 70 percent of the economy. The government first cut its growth target in May to 5.7 percent to 6.6 percent this year, from 6.3 percent to 7 percent previously. It will release second-quarter economic data next week.

Saturday, August 9, 2008

Philippine Exports June 2008

Philippine export growth accelerated to a four-month high in June as a weaker peso made the country's disk drives and mobile-phone chips cheaper and shipments to China countered weakening demand from the U.S. Shipments abroad rose 8.3 percent from a year earlier to $4.49 billion, compared with a 2.3 percent gain in May, according to preliminary figures released by the National Statistics Office in Manila today.
The peso, last year's best performer in the region, fell for a fourth month in June, boosting the foreign-currency earnings of exporters.

Overseas sales account for about two-fifths of the Philippines' $118 billion economy, which grew at the slowest pace in six quarters in the first three months of the year. Sales of electronics, which make up two-thirds of the Philippines' total exports, climbed 6.4 percent from a year earlier to $2.63 billion.

Philippine shipments to China rose 8.8 percent in June from a year earlier to $491 million. Exports to Hong Kong advanced 10.5 percent to $436 million.

Sales to the U.S., the Philippines' biggest overseas market, declined 0.1 percent to $703 million in June. Shipments to Japan, the No. 2 destination, gained 2.6 percent to $652 million. Exports of clothing for fashion houses such as Polo Ralph Lauren and The Gap declined 7.6 percent.

Remittances from Philippine citizens working abroad also amounted to 13% of GDP in 2006 according to World Bank estimates.

Tuesday, August 5, 2008

Philipine Price Inflation

The Philippine annual inflation rate, as measured by consumer price index, continued to accelerate in July, hitting a near 17-year high of 12.2 percen. June inflation was 11.4 percent while inflation in July 2007 was only 2.6 percent, according to the latest data from the National Statistics Office. The July figure was the highest since December 1991.

Higher annual inflation rates were registered in all the commodity groups except in the fuel, light and water index. The overall annual inflation rate for food alone further climbed to 18.6 percent in July from 17.4 percent in June. Higher year-on-year inflation was noted in rice at 50.0 percent in July up from 43.0 percent in June; corn, 40.6 percent from 34.3 percent; cereal preparations, 17.6 percent from 16.6 percent.

But the National Statistics Office pointed out that the monthly increase in consumer prices slowed to 1.5 percent in July from 2.3 percent in June. Monthly price increases slowed in food, beverage and tobacco - at 1.6 percent in July from 3.0 percent in June and services, at 3.1 percent from 4.0 percent.

The annual core inflation rate, which strips out volatile food and energy items, slipped to 6.3 percent in July from 6.6 percent in June. However, as the July inflation exceeded the central bank's forecast range of 11.2 - 12 percent, it is clear that the central bank might feel forced to hike interest rates again at the next meeting at the end of August. This would then be the third hike since June.

Philippine central bank policymakers last voted on July 25 to hike overnight rates to 5.75 percent for borrowing and 7.75 percent for lending. Central bank officials have said they expect inflation to peak in the fourth quarter before falling back to an acceptable level in the first quarter of 2009.

The Philippines, which buys most of its fuel from abroad and has is now the world's largest rice importer, is one of the Southeast Asian countries worst hit by inflation. The central bank has twice revised its inflation projection of the year from an impossible 3 - 5 percent to currently 9 - 11 percent.

Phillipine producer prices remain contained, hitting only 3.3% in June, which is the latest month for which we have data.