PHILIPPINE NEWS SERVICE — Surging food prices pushed inflation rate to 9.6 percent, the highest level since 1999, but Malacañang said the government has responded to this challenge by giving subsidies to the poor.
The National Statistics Office said in a statement that the rise was “primarily triggered by the continuing higher annual price increases in the heavily weighted food, beverages and tobacco index.”
Philippine share prices closed 1.97 percent lower on news that the inflation rate had hit a nine-year high.
The Central Bank raised interest rates by 25 basis points in a bid to curb Inflation. The overnight borrowing rate rose to 5.25 percent while the overnight lending rate was increased to 7.25 percent.
The composite index lost 54.70 points to 2,718.42. The all-share index was down 26.84 points to 1,697.07 points.
The local currency traded at 44.079 to the dollar.
“The market is down because of the inflation figures,” said Allan Araullo of Regina Capital Development Corp.
The inflation rate hit a nine-year high of 9.6 percent in May the highest level since 10.5 percent in January 1999.
April’s annual inflation was 8.3 percent and took the average figure for 2008 to 6.9 percent, well above the government’s full-year target of 3.0-5.0 percent.
Excluding selected food and energy items, core inflation rose to 6.2 percent in May compared to 5.9 percent in April, the office said.
Araullo said the increase in inflation was expected due to rising food costs, but that the May figure was “on the high side” of forecasts by economists.
Predicting 9.6 percent would be the peak, he said inflation “should taper off in the coming months as most of the commodities’ prices are coming down already.”
He predicted inflation “will still go higher but the degree of increase will not be as much as in previous months.”
Malacañang, however, allayed fears on the record increase, saying government subsidies will help the people cope with rising prices.
Cabinet Secretary Ricardo Saludo cited the P4-billion power subsidy and sale of government-subsidiz ed National Food Authority rice for the benefit of the poorest households as among the major steps the government initiated to help the people cope with inflation.
Saludo said the government had so far infused P6 billion to stabilize the supply of cheap NFA rice in the market and the poor barangays.
The Department of Social Welfare and Development also has its “Ahon Pamilyang Pinoy” program which provides a cash grant package of P6,000 a year or P500 per month per household for health check-ups and vaccines, and P3,000 education cash grant package per year or P300 per month per school child, to a maximum of three children per household. On Wednesday, Malacañang also announced a P1,500 fertilizer subsidy for farmers.
Saludo said the government is also relentless in its campaign to lower electricity rates, particularly for consumers in areas being serviced by the Manila Electric Company.