The Philippines will suffer a hard-hit by the global soaring rice prices, which might push the country 's inflation to a record 8 percent, well above the government's 3.0-5.0 inflation prediction for 2008, USB, one of the world's leading financial firms said in a research report on Friday.
In its latest report, UBS Investment Research said compared with other Southeast Asian economies the Philippine economy "is at most risk" from higher food prices for its over dependence on imports and the fact that rice is an irreplaceable staple for 88 million Filipinos.
UBS said the global food prices escalation has forced it to raise the 2008 CPI inflation forecasts for the Philippines, Thailand, Malaysia and Singapore in the region, with the Philippines leading the group with a 1.4 percentage points upward adjustment.
"In the Philippines, the CPI (Consumer Price Index) rice component is more closely related to available daily price data for Manila--which suggests CPI inflation rates close to 8 percent in coming months," UBS said, adding that the headline inflation for the Philippines is likely to exceed 6 percent on average for the year 2008.
In the Southeast Asia, the Philippines has the highest food share in its consumption basket, pegged at 50.03 out of 100 price index basket weights, the report says.
UPS said the CPI inflation is expected to take a steep rise as the government cannot dictate the commercial retail rice price.
As one of the world's top rice importers, the Philippines expected to buy not less than 2.2 million metric tons of foreign rice in 2008. It has purchased about 1.2 million metric tons so far but failed to secure another 500,000 metric tons for April-June delivery on a Thursday's bidding.
Only 325,750 metric tons of rice were offered at prices ranging from 872.5 U.S. dollars to 1,220 U.S. dollars per metric ton, more than double the price at this January's bidding.
To ensure rice remains affordable to almost 3 million poverty-stricken Filipinos, the government has invested a swelling amount to keep the subsidized rice be sold at an unchanged price of 18.25pesos per kilogram (0.45 U.S. dollars). Commercial rice sold at free market have seen prices rising up to around 40 pesos (0.97 U.S. dollars per kilogram.
UBS said the cost for the Philippine government to buy higher prices of foreign rice and insist selling it at lower prices domestically would potentially cost not less than 43 billion pesos(1.05 billion U.S. dollars), or 0.6 percent of the GDP (Gross Domestic Products) for this year.
Source: Xinhua
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