RP’s inflation lowest in 20 years

PHILIPPINE NEWS SERVICE — INFLATION, the rate at which consumer prices is rising, dropped to its lowest point in 20 years last month, thanks to a strong peso and a stable oil market.

The National Statistics Office said the rate of inflation in March 2007 fell to 2.2 percent, the lowest since April 1987, when it stood at 1 percent. The inflation rate was 7.6 percent in the same month last year.

“It looks like the era of low inflation has arrived,” said University of Asia and the Pacific economist Emilio Antonio, who added the central bank should now consider lowering interest rates.

Reporting on the March figures, agency Administrator Carmelita Ericta said the inflation rates of all commodity groups except clothing fell in March.

The rate was within the central bank’s target of 2.0 to 2.6 percent for the month. The first quarter average of 2.9 percent was markedly lower than the first quarter average of 7.3 percent last year.

“An ample supply of major food items such as meat, fish, and fruits and vegetables contributed to the inflation downtrend,” Economic Planning Secretary Romulo Neri said.

Consumer prices were slightly lower on a month-on-month basis because the cost of food items such as fish, fruits, vegetables and meat continued to decline.

“The abundant supply of fruits and vegetables during summer pulled prices down by 2.6 percent. The peak fishing season of tuna… pulled the prices of fresh fish in the wet markets down by 0.4 percent, while an abundant supply of chicken and pork brought about the downtrend in the meat index by 0.1 percent,” Neri said.

By commodity group, year-on-year inflation for food, beverages and tobacco slowed to 2.6 percent in March from 3 percent in February. The rate for housing and repairs dropped to 1.4 percent from 2.3 percent. Fuel, light and water showed a 1.2 percent rate of inflation, down from 1.5 percent.

The rate of inflation on services including education, medical and personal services, recreation, transportation and communication fell to 2.2 percent in March from 2.4 percent in February.

Miscellaneous items—a category that includes household furnishing and equipment, personal care and effects—showed an inflation rate of 1.8 percent, down from 2.0 percent.

Year on year, the inflation rate for clothing remained at 2.7 percent. On a monthly basis, a greater demand for ready-made apparel, footwear and textile fabrics during the graduation season caused the clothing index to go up by 0.2 percent.

The Asian Development Bank said inflation in the Philippines appeared to be well under control.

The bank said it expected prices to grow by 4.8 percent in 2007, slower than the average inflation rate of 6.2 percent in 2006 and 7.6 percent in 2005.

Market analysts said the low inflation should give the central bank elbow room to lower interest rates, which now stand at 7.5 percent for overnight borrowing and 9.75 percent for overnight lending.