Wage Hikes to Complicate Economic Management

Manila Bulletin, April 22, 2008 | Go to article overview
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Wage Hikes to Complicate Economic Management


Byline: FIL C. SONIL

Standard Chartered Bank projected a rough road ahead for the Macapagal Arroyo economic managers should the government gives in to 22 percent increase in daily wage to soften the impact of spiralling cost of basic commodities due to the escalating prices of oil and other petroleum products.

According to Standard Chartered Regional Economist Simon Wong, macroeconomic management would be difficult, moving ahead, particularly on the part of the Bangko Sentral ng Pilipinas (BSP) as inflation is seen to move up dramatically in the coming months.

"An eventual wage agreement that come across as being too generous will have a major negative impact on macro policy management. A hostile wage development will stir fear that a home grown inflation spiral has dawned and stop the central bank in its easing path," Wong said.

Bank economist has change his view on the policy direction of the BSP in the wake of the 40 percent year-on-year jump in inflation rate for the month of March, soaring to 6.4 percent.

This came on the back of the observations of international economists that the price of oil per barrel in the international market will no longer come off and go back to $90.

To recall, the Trade Union Congress of the Philippines has sought for a 22 percent hike in daily minimum wage to R442 from the prevailing R362 that would "entail an immediate extra cost" of between a low of R20 billion and to a high of R30 billion, equivalent to 0.

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