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Philippine Dec inflation seen at 4.35 pc

MANILA: Philippine consumer prices are likely to have risen more in the year to December than in the year to November but stable food prices and a base effect will keep the annual figure relatively benign, economists said.

A Reuters poll of economists forecast December year-on-year inflation to come in at an average 4.35 percent, compared with 3.9 percent in November and 10.4 percent in December 1998.

Socioeconomic Planning Secretary Felipe Medalla has said December annual inflation, to be announced this week, would remain below six percent.

Economists said steady prices for food, which accounts for half of the consumer basket, have kept at bay effects of a wage hike, petroleum and transport fare increases, and the seasonal uptick in December consumer demand.

"We continue to enjoy the benefit of the good harvest this year," said David Cohen, chief macroeconomic forecaster for S&P MMS. "Inflation has been steady...there's no reason for a departure from that pattern."

The base effect also played a part in containing inflation this year, economists said. At the end of November, the average annual inflation rate for 1999 was at 6.9 percent.

"It's really a low base from last year because of the La Nina (weather pattern)," said Emilio Neri Jr of Abacus Securities.

Analysts have blamed the tight food supply caused by weather disturbances for a spike in food prices in 1998.

Prices this year were tempered by robust agricultural supply. La Nina led to plentiful rains and the farm sector posted strong growth in the past three quarters of the year.

For 1999, economists expect the average inflation rate to be within 6.7 to 6.9 percent compared with a 9.8 percent average in 1998. The government has projected the 1999 average inflation rate to be between seven to eight percent.

Increased buying of consumer goods ahead of the millennium rollover was not expected to be a big factor in the December rate, economists said. The Trade and Industry Department has said it did not observe excessive buying due to Y2K fears.

Going forward, consumer prices are expected to pick up as the economy recovers, economists said. There will also be no base effect to cushion the consumer price basket.

"The year-on-year numbers should start getting higher just because they're not benefiting from the comparison with the higher food prices last year," said Cohen.

Inflation could also be boosted by higher oil prices and interest rates if the government fails to contain its budget deficit, economists said.-Reuters