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Economists: Worst is yet to come

Filipinos still need to tighten their belts for the next six months as economists predict that the worst is not yet over.

Economic experts said prices of rice and petroleum products would continue to soar in the next few months.

The average price of petroleum products this March has reportedly reached US$96 per barrel as compared to the US$90/barrel in February.

Meanwhile, the cost of rice, a staple food in the country, is also climbing because Thailand and Vietnam’s harvest weakened. The Philippines is importing rice from Thailand and Vietnam.

Experts said the price of the rice and oil will continue to increase because of the big demand in China and India.

Cause to worry
"We have on one side the picture of a very rapid growth of the Chinese and Indian economy. As they double a lot of their supply of coal, wheat, oil and rice, these things are going to be very expensive in the Philippines. We're beginning to see it in the case of rice," said Dr. Felipe Medalla, dean of the University of the Philippines, School of Economics.

"Obviously there is worry especially about prices. Prices obviously are having a strong pressure upwards because of oil prices and again this global rise in food prices is really with us," Dr. Cielito Habito said.

Medalla and Habito were former socioeconomic planning secretaries.

Long-term uncertain
Medalla said it would be hard to stop the price increase particularly since the country is facing external factors, political problems and poor governance.

"Is a government mired in all sorts of scandals to be trusted by the people? Suppose the government says I'm an honest government, I'm telling you we have to have a slight rise in price to encourage farmers to produce. Who will believe it?" Medalla said.

They however advised the public to prepare as the long-term effect to the country is still uncertain.

"Let's prepare for the worst, let's be ready to tighten up our belts because definitely the worst things are coming but then again, not to lose hope. In the end, the economy is only as good as the people who make up the economy," said Habito.

Reuters poll - RP econ to slow
Philippine economic growth will slow this year from a three-decade peak in 2007 dampened by weak exports, slowing private investment, as well as rising inflation, a Reuters quarterly poll showed.

But government spending to rehabilitate and upgrade public infrastructure after years of neglect should provide some support, analysts said.

The median forecast of economists polled was for gross domestic product (GDP) to expand 5.8 percent in 2008, slower than 7.3 percent growth in 2007.

Lower than Dec poll
The latest 2008 growth forecast is lower than the 6.1 percent estimate in a similar poll conducted in December and is lower than the government target of 6.3-7 percent growth this year.

"The expected slowdown in the Philippine economy is really externally driven," said Frederic Neumann, an economist at HSBC.

"Aside from exports, remittances will also take a hit on the chin, which means slower consumption growth."

Fears of an abrupt US downturn loom large in the Philippines, where 16.2 percent of exports are bought by Americans, and where an estimated 30 percent of overseas Filipino workers' remittances come from. With reports from Bandila and Reuters