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INFLATION JUST 'ROUND THE BEND The Philippine Star Unlike in the past when it was easier to dismiss calls for higher salaries and fare hikes, this time it's the government partly spurred by a need to win mass support that's initiating discussions. The retail price of rice has already gone up more than 40 percent in the past 12 months and fuel prices have already increased eight times this year. And with both commodities still rising in the world market, the worst is still to come. The higher cost of the two products have led to price hikes in almost everything nowadays, from the pandesal that you eat to start your day to the banana that you'd have for dessert before calling it a day. Taking a cue from the spiraling prices and government's seeming willingness to find measures to cushion the impact of the rising cost of living, labor and transport groups have filed petitions for increases. Already, about a million government workers will get a 10-percent hike in their base pay starting July. The Trade Union Congress of the Some jeepney groups have asked for a provisional increase of 50 centavos in the minimum fare of P7.50, or a six-percent hike. Buses and other jeepney associations have asked for varying degrees of adjustments. Cost of a wage hikes Analysts say that a 22-percent increase in wages for all the three million daily wage earners in the country would raise the cost of employers by an amount equivalent to more than one percent of the country's gross domestic product. Based on last year's GDP of P6.7 trillion, this translates to about P67 billion. That would definitely be inflationary. Even before these increases could take effect, the spiraling commodity and fuel costs have already pushed the country's inflation rate to 6.4 percent in March, the highest in 20 months. Record oil of $119 a barrel and rice future prices, also a record levels of more than $1,000 a ton, will probably fan inflation to between 7 and 7.5 percent, if not higher, economists are already warning. The country's rate of inflation is already way beyond the central bank's full-year average target of 3 to 5 percent. Policy-makers who consistently assured the public that price increases were still within target this year suddenly turned quiet when the March CPI was released, signaling that inflation this year would probably exceed the central bank's goal. Bangko Sentral officials said they considered some wage and fare increases in the inflation target. The extent of the increases the central bank factored in would probably be lower than those being proposed. What's worrying about higher wages and fares, being second-round inflation, is how they'd tend to pump up prices that could potentially lead to a never-ending spiral. Granted wage and fuel hikes have always been substantially lower than proposed. Still, any increase in the purchasing power-triggering demand-side inflation and coupled by cost-push increases would tend to accelerate prices even more. Plea for moderation The key, according to the central bank, is moderation, and rightly so. It's not just for the sake of keeping within the inflation target but also in managing implications, particularly of higher wages. An excessive wage increase may force some employers to cut jobs, seeing how slowing global economies tend to damp demand anyway. Even with eight million or so Filipinos working overseas, unemployment in the Then there too, is the danger of increases in costs exceeding the benefits of the wage increase. Let's say the wage boards approve a 10 percent increase in daily wages and yet prices of goods and services go up by 15 percent as a result, then the higher pay would have been useless. On the monetary side, clearly central bank's hands are tied at this point. It had cut the overnight borrowing rate five times from July to January to 5 percent, shaving off a total of 2.5 percentage points. During those times, however, it kept borrowing costs high at the same time by paying higher rates on the special deposit accounts a tool it had used since May of 2007 to keep a rein on money-supply growth, which a year ago peaked at 26.3 percent and was definitely inflationary. Now, liquidity growth has slowed down with the money that had flooded the central bank's deposit accounts; monetary authorities, however, may still be undecided on whether some form of easing is needed at this point amid rising inflation. With money in supply below last year's GDP expansion of 7.3 percent, it seems now there's not enough monetary growth to fuel the economy. And with the Without doubt, inflation is posing a very serious threat. And this is where we just have to leave the decisions to those qualified to do them, hoping that they would be making the right ones. The decision process has to be sober without the noise and fanfare of political grandstanding. At any rate, everyone seriously needs to brace for tough days ahead. Basketball scene It looks like political intrigues in the local basketball circle claimed its first victim with the sudden resignation of Pato Gregorio, BAP-SBP executive director and identified as a close ally of BAP-SBP President Manny Pangilinan. Some BAP personalities have been faulting Gregorio, and indirectly Pangilinan, for what they claim as shortcomings of the current BAP-SBP leadership. Political mudslinging is expected to intensify as BAP-SBP elections are forthcoming. Some good news on the collegiate basketball side. The Filoil Flying V top honchos led by Raffy Villavicencio, Virgil Villavicencio and David Dualan will be handing out scholarship grants to the winners of the recently concluded Collegiate Championship 2007 in simple ceremonies to be held on Receiving funds for their scholarship programs are University of Visayas (Runner-up) P200,000, STI Colleges (3rd placer) P100,000, and University of Santo Tomas (4th placer0 P50,000. The 2007 Collegiate Champion, Ateneo de Manila, will receive their P500,000 grant on 7th June during the scheduled De La Salle-Ateneo showdown in the ongoing FilOil Flying V Pre-season tournament.
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