MANILA, Philippines?The National Economic and Development Authority ((NEDA) said it was reviewing the official gross domestic product (GDP) growth target of 6.3-7.0 percent for this year, as rising prices of food and other commodities are expected to adversely impact on the economy.

NEDA Director General Augusto Santos said the government had assumed an inflation rate of 3.0-5.0 percent for the year when the GDP growth target was set.

Inflation has risen beyond 5.0 percent since February. The National Statistics Office has reported that year-on-year inflation accelerated to 6.4 percent in March from 5.4 percent in February and 4.9 percent in January.

Santos said a study by government economists that was presented to Malacañang showed inflation could soon reach 8.0 percent.

?Faster inflation normally reduces GDP growth because it adversely affects consumption and production,? Santos told the Inquirer.

Accelerated increases in prices usually dampen consumer spending and investments by businesses, two main drivers of GDP growth.

Santos said members of the inter-agency Development Budget Coordination Committee (DBCC) would meet soon to discuss proposed changes to the GDP growth target and other economic assumptions for 2008.

The economy posted a robust 7.3-percent growth last year. It was the fastest GDP growth in 31 years and came with a benign inflation environment. Consumer prices rose by 2.8 percent last year, when the government assumed a range of 4.0-5.0 percent.

Last year, aside from the absence of problems on tightening supply of rice and other food products, the appreciation of the peso also helped temper inflation.

Although the peso is expected to remain relatively strong this year, analysts do not expect its strength to be enough to offset the ill-effects of rising food prices and keep inflation within 3.0-5.0 percent.

Santos said the faster rise in consumer prices was driven both by supply and demand pressures.

He said climate change and the conversion of many farmlands into real estate development zones in many countries were causing tightening supply of rice and food. The growing economies of India and China are increasing global demand for food, he noted.

?There is a very strong correlation between economic prosperity and food consumption. Because China and India, which have a combined population of about 2 billion, are becoming economically prosperous, global consumption is rising,? Santos said. Edited by INQUIRER.net