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MANILA’S
problems with rice may spill over from the realm of
consumer price concerns and into the political arena,
which could prove more difficult to contain.
In its
latest paper on the Philippines, the Japanese investment
banking giant Nomura said the problems linked to
expensive rice was not only a threat to inflation but
also to the political situation.
Rice
accounts for a mere 10 percent of the consumer price
index, according to government officials, as the
Philippines is 90-percent rice-sufficient.
“The
problems associated with expensive rice pose risks not
only for inflation and the overall economy but also for
political stability, given potential social unrest and
heightened opposition to the administration,” Nomura
researchers said.
They
noted the national broadband project “has yet to be
completely cleared of corruption allegations” and that
the rice crisis “could push public support [for
government] to fresh lows.”
“This
could seriously hobble the Arroyo administration, which
has just over two years until its term expires in 2010.
“Should
the government appear to lose its mandate to implement
constitutional and fiscal reform, we think the
confidence of foreign investors in the Philippines could
be damaged,” the researchers said.
Their
paper noted that rice prices have been fueling
inflationary pressures as the staple retails in
Manila at P32 a kilo, or 33.3 percent higher than at the start of
the year. (In some cases, a kilo of rice sells for P51.)
Its
price has also gone up 45.5 percent from a year earlier,
the researchers added.
Along
with the escalating price of imported oil, these
precious commodities together have been pushing
inflation higher with each passing month. Inflation is
forecast to hit 8.9 percent to 9.6 percent in May, from
8.3 percent in April.
Nomura
researchers believe inflation for the year should
average 7.3 percent from 2.8 percent last year.
Its
researchers consider the Philippines “more exposed” than
other Asian countries to inflation driven by rice
prices. |
