INFLATION in the Philippines was 7.8 per cent year-on-year in October but there are signs of easing after a fall from 8.6 per cent the previous month. The rate of rising prices in metropolitan Manila also moderated further in October, with inflation falling to 7.4 per cent compared with 8.8 per cent in September. The main reasons for declining inflation figures are lower food prices and weaker beverage and tobacco prices around the country. According to the National Statistical Office, October's lower food prices reflect sufficient farm produce supply and increased deliveries of vegetables. The long-term prospects for inflation are bright given the continuation of deregulation measures, improved government finances and increased electricity supply. Foreign investment in the Philippines soared to US$687 million (HK$5.31 billion) in the first eight months of this year and improved 65 per cent year-on-year as the country continued to attract foreign investment. The surge in foreign investment this year has already taken the amount of capital coming into the country past last year's total of $509 million. The European Union (EU) this year overtook the United States and Japan as the largest single foreign investor although the US remains ahead on a cumulative basis. Between January 1973 and August 1994 (when cumulative investments totalled $6.37 billion), the US accounted for 36 per cent followed by the EU (18 per cent) and Japan (16 per cent). While the US remained the country's largest investor over the 21-year period, Japan has consistently outpaced the US in the past five years as Japan turned its investment sights closer to home. Between 1988 and 1993, Japanese investments totalled $643 million, closely followed by the US at $620 million, including reinvestment figures. On the trade front, the deficit rose to $5.9 billion for January to September, compared with a deficit of $4.5 billion over the same period last year. The near 25 per cent widening of the trade deficit came despite an 18 per cent improvement in the value of exports year-on-year to $9.7 billion. The main contributor to growing exports was the surge in electronic components, telecommunications equipment and industrial machinery being shipped abroad. At $5.9 billion, the deficit is still short of the projected 1994 full-year figure of $6.5 billion, although it is likely the figure will be breached by the year-end. The target figure for 1994 was set with the co-operation of the International Monetary Fund (IMF) and presented to Manila and its major aid donors last July. Looking forward, the IMF target is likely to be exceeded due to buoyant investment commitments in the manufacturing sector and a stronger peso. We project a $7.9 billion deficit for 1994. In the energy sector, output surged. Power shortages in the Philippines may become a thing of the past judging by the latest statistics. According to the National Power Corporation, energy sold (including power purchased from private firms), rose to 22,805 gigawatts - an 18 per cent increase year-on-year - made possible by the addition of 14 power-generating plants, mostly under the Government's build-operate-transfer scheme. The scheme is proving to be a success as new power plants come on stream, easing the shortages that have been a feature of life in Manila.