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Philippine Business Magazine: Volume 13 No. 2 - Cover

LPG Price Rollback
Household Godsend

Answered prayers for homemakers and other liquefied petroleum gas users—LPG prices finally went down in March after having risen steadily since 2005. The total price reduction in March was a significant P3.00 per kilogram, or P33.00 for every 11-kilogram cylinder. The rollback was implemented in weekly installments: P1.00 per kilogram in the first week; P0.50 in the second; P0.50 in the third; and another P1.00 in the fourth.

According to Trade and Industry Secretary Peter Favila, lower international contract prices for LPG brought about the series of price cuts. The contract price in March was set at US$530.00 per metric ton, 15.3% lower than the all-time high US$625.50 per metric ton in February. Moreover, the March contract price was still lower than last January’s price of US$582.00 per metric ton. Aside from the international price cutback, the strengthening of the peso also contributed to lower LPG prices.

However, this breather for consumers may only be temporary. According to the International Energy Agency, “strong economic growth and rising crude demand, physical supply unpredictability in Iraq and Nigeria, and low Pacific product stocks are likely to counterbalance additions to capacity.”

Welcome Respite After enduring months of steady price increases, LPG consumers found relief in March
As of	LPG Price
	(Per 11-kilogram tank)

1-Jan	P474.00 - 524.00
28-Feb	P500.00 - 550.00
7-Mar	P484.00 - 540.00
13-Mar	P483.00 - 540.00
21-Mar	P477.00 - 533.00
28-Mar	P466.73 - 520.00
Source: Department of Energy

Nowadays, global oil price and supply movements have also become politically driven. Major threats in the first quarter of the year included fears about the resumed uranium enrichment program in Iran (the world’s fourth-biggest crude producer) and the bombing of some oil refineries in Nigeria (Africa’s biggest oil producer).

Meanwhile, the Organization of Petroleum Exporting Countries has promised to keep its oil output sufficient. In a report, OPEC said that it would maintain its production level of 28 million barrels per day, an output it has been producing since July 2005.

Signals

The country’s headline inflation rate remained at 7.6% in March, the same pace of increase in consumer prices last February. However, the core inflation rate picked up to 6.5% in March from 6.3% the previous month.

The public sector posted a narrower fiscal deficit of P106 billion in end-2005 from P232 billion in end-2004. The combined shortfall of the government in 2005 was equivalent to 2.0% of GDP, lower than the 4.9% ratio in 2004.

The Bangko Sentral’s gross international reserves reached an all-time high of US$20.8 billion in end-March. The level of foreign reserves could finance 4.3 months’ worth of imports of goods and payments of services and income.

The country’s outstanding foreign debt dropped 1.2% to US$54.2 billion in end-2005 from US$54.8 billion in end-2004. The external-debt service ratio also improved to 51.5% of GNP from 59.5%. The debt service ratio also dipped to 13.3% from 13.8%.

Exports shrank 0.9% to US$3.27 million in January from US$3.29 million a year ago due to the 2.2% decline in electronic product exports, 0.6% dip in garments exports, 11.3% drop in exports of ignition wiring sets, 29.0% decrease in metal components exports, and 39.8% fall in furniture exports.

Meanwhile, imports gained 5.1% to US$3.68 million in January from US$3.50 million a year ago, despite a 7.9% fall in imports of electronic products. Fuel imports surged 66.2% to US$681.1 million from US$409.7 million. The balance of trade deficit in January widened to US$415 million from US$207 million a year ago.

Net foreign portfolio investments plunged 66.0% to US$489.7 million as of end-March from US$1.4 billion a year ago. Portfolio investments inflows fell 29.4% to US$1.5 billion from US$2.1 billion. On the other hand, outflows of portfolio investments grew 53.2% to US$978.1 million from US$638.4 million.

Tourist arrivals grew 17.0% in the first two months to 491,871 visitors from 420,376 a year ago. The Koreans emerged as the country’s top guests, with 106,261 visitors. Second were the Americans with 97,714. Visitors from China, however, almost tripled to 23,227 from 8,836. But visitors from Japan decreased to 26,402 from 68,557.