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lovephileo's review
Investment Sector: Currencies Submitted by Lovephileo 
, WEB CONSULTANT / PASTOR
at LIGHT OF THE WORLD CHRISTIAN CENTER
6 months ago Tags: stagflation inflation fuel LPG Oil Add Tag |
A time of stagnation - accompanied by inflation as defined by Investopedia. This is where the Philippine economy is heading to, a killing season in the Philippines, where 35 million poor Filipinos are affected daily tremendously.
Now is the time for the government to show its dynamic leadership in the country facing 10% inflation rate to 15% through the year which will make up an economic catastrophe, unless something radical is done quickly.
Philippine annual inflation jumped to a nine-year high of 9.6% in May, highest in nine years. It is bigger than what the market had expected. Skyrocketing food and fuel prices forced the government to abandon its goal of a balanced budget this year and also cut its 2008 growth target to 5.7%-6.5% from 6.3%-7.0%, despite a seven percent economic growth, the country particularly the stock market is facing a natural disaster. The Philippine government is looking at a possible P40 billion ($900 million) budget deficit this year and P75 billion worst case.
Banko Sentral ng Pilipinas (BSP) raised the rates by at least 25 basis point to try to stop the depreciation of peso. But Philippine inflation is being caused by high fuel prices to which we cannot do anything to reduce the world price of oil. This high inflation creates an economic meltdown that will destroy all the gains from the past few years. The Philippines is expecting a negative growth for 2008 if inflation continues higher than 10% this year.
Food inflation climbed to 14.3% from 12% in April with rice prices surging 31.7%. Prices of corn, cereals and dairy products also rose at double-digit pace. Inflation for the fuel, light and water group rose to 8.2% from 8% in April. High inflation is likely to dampen consumer spending in the Philippines with fewer families planning to buy houses, cars and appliances in the near term. Unemployment rate and interest rate are expected to rise.
But in alll of these, the government seems to be hiding the truth how immediate and severe the problem is. Is the government protecting its image and political capital? The time has come to name the game transparency and that the role we play must be unity. Radical steps must be taken to ease the effect of inflation especially to the poor. The Manila Electric Company has already lower the rates charge to consumers, National Food Authority is accessible for the poor society, P4 billion VAT is extended to poor college students, farmers and electric household consumers. The government has also announced a $68 million quarterly fuel subsidy for the public transport sector and loans to help convert buses and taxis to alternative fuel. The government is going to the international debt market to raise $750 million to help pay for it all. First GAs Power Corporation temporarily removed of the royalty tax on natural gas to bring down the cost of electricity by 200 a month for lifeline consumers or those consuming 100 kilowatt hour and below. Fine, yet government subsidy and the likes do not help the situation in the long run for these were but short-term solutions. In fact, State subsidies could strain fiscal positions and distort markets.
Stabilizing food products through production will secure the whole country on a long-term basis. The country must maximize Mindanao's potential as an agricultural hub. Mindanao is producing 9 million metric tons of copra a year. 1.8 million metric tons of fish annually and more than enough for the needs of more than 22 milion Mindanaons. Mindanao was able to produce a combined 6.6 million metric tons of rice and corn in 2005. And Mindanao has an army of 4.1 million workers in agriculture who are on standby mode and are more than willing to do their share in attaining food security of the whole country if given the right support and incentives by the government.
Further, promotion of alternative fuel production like liquefied petroleum gas (LPG), used by taxi drivers and compressed natural gas (CNG), used in buses must always be given priority rather than a band-aid type of solution. This LPG-fuelled passenger jeepneys will give the drivers an additional income of P380/day.
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WEB CONSULTANT / PASTOR at LIGHT OF THE WORLD CHRISTIAN CENTER
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