Philippine inflation hits nine-year high in May

MANILA, June 5, 2008 (AFP) - Surging food prices in the Philippines pushed its May inflation rate to 9.6 percent, the highest level since 1999, the government said Thursday.

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."

It added that prices in other commodity groups rose more quickly too as the overall annual inflation figure in May hit 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.

Allan Araullo, head of research for Regina Capital Development Corp., 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."

However, an economist for a major Philippine bank said rising inflation was already having an effect, pushing up the Philippine peso while deterring fund flows into the stock market.

The higher inflation will likely prompt Philippine authorities to raise key interest rates by 25 basis points when they meet later Thursday, said the economist, who asked not to be named.

He predicted inflation "will still go higher but the degree of increase will not be as much as in previous months."

The Philippines, one of the world's largest rice importers, has been hit hard by a worldwide rise in the price of rice.

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