MANILA, Sept 14 (AFP): After 2007 saw the best economic growth in three decades, the Philippines is now struggling to control surging inflation, meaning interest rates may have to rise, putting a cap on recent successes.
Economists and businessmen agree that while such a rate hike could be painful, it may be the best option for the country as it tries to navigate the rough seas of the global economy.
Cesar Bautista, head of a joint government-private sector council on national competitiveness, warned: "If inflation is too high, no growth or salary hike will ever match the increase. You will be risking a revolution."
Socio-economy planning Secretary Ralph Recto foresees gross domestic product (GDP) growth this year at 5.0 to 5.5 per cent, while the Congressional Planning and Budget Office has brought its target down to 4.6 to 5.1 per cent.
The figures, while respectable, are sharply down from the government's original target of 6.3 to 7.0 per cent.
The Philippines entered 2008 with optimism after posting its best growth since 1976 at 7.3 per cent, while inflation slowed to a 20-year low of 2.8 per cent.
But a sharp rise in food and fuel prices has had a crippling effect on the country-one of the world's largest importers of rice and a consumer of imported oil for virtually all of its transport needs.
Earlier this month, the government said inflation had surged to a 17-year high of 12.5 per cent in August. Just weeks earlier, it announced GDP growth in the first half of the year stood at 4.6 per cent.
The Philippine central bank raised interest rates by 25 basis points late last month, taking the overnight borrowing rate to six per cent and overnight lending rate to eight per cent in a bid to stem inflation.
Philippines inflation to put brakes on historic economic growth
FE Team | Published: September 15, 2008 00:00:00 | Updated: February 01, 2018 00:00:00
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