MANILA – (UPDATE, 3:36 P.M.) The Philippines’ inflation rate hit 4 percent in January 2018, the upper end of the government’s 2017-19 target and the highest after the 4.3 percent in October 2014.
This uptick, however, was expected, Bangko Sentral ng Pilipinas (BSP) Governor Nestor Espenilla said, referring to the central bank’s 3.5 percent to 4 percent target for the month.
Last month’s inflation rate is a big jump from the December 2017’s 3.3 percent and the 2.7 percent in January 2017.
Excluding volatile food and oil, core inflation jumped to 3.9 percent from the previous month’s 3 percent.
In a message to reporters, the central bank chief attributed the faster rate of price increases in the first month this year to a combination of factors that include the first round effects of the first package of the Tax Reform for Acceleration and Inclusion (TRAIN) law, uptick of oil prices due to the same trend overseas and its impact on some food items.
“We think these are temporary drivers of inflation and would eventually stabilize,” he noted. “Nevertheless, BSP will be closely monitoring the situation and stand ready to take timely action based on our evaluation of all relevant data,” he added.
The Philippine Statistics Authority (PSA) on Tuesday reported that the faster inflation rate in the first month this year was due to increases in heavily-weighted food and non-alcoholic beverages, which registered a 4.5 percent rate this year against the previous month’s 3.5 percent.
Rate of price increases of alcoholic beverages and tobacco, in turn rose double digit to 12.3 percent from last December’s 6.4 percent.
Faster inflation was also noted on other indices namely furnishing, household equipment and routine maintenance of the house; health; transport and restaurant and miscellaneous goods and services.
Starting January 1 this year, the government implemented the first package of tax reform, which gave the workers’ first P250,000 annual income a tax-free rate, among others.
To counter the effect of this on government revenues, excise taxes on fuel and sugar-sweetened beverages were hiked.
Economic officials said the first tax reform package should not have any immediate impact on the price of affected commodities since items covered by the tax reform were old inventories; thus, not yet affected by the excise tax hike.
Finance Secretary Carlos Dominguez III, in a message to reporters, said he has to “look at the figures closely” to check if the faster inflation rate last January was partly due to the implementation of the tax reform.
“Unless, of course, merchants took advantage of the law and raised prices on old inventories,” he added.
Monetary officials earlier said the impact of TRAIN on this year’s inflation rate was seen to be transitory, thus, their projection that inflation would average at 3.4 percent this year.
In the Department of Finance’s view, the rise in inflation in January may be partly traced to the excessive price adjustment for the sin tax, the SSB (sugar-sweetened beverage) tax in the TRAIN Law in the case of non-alcoholic beverages, and weather disturbances in the case of vegetables. However, added DOF, “it should be noted that a significant portion of January’s inflation rate is contributed to by tobacco and alcoholic beverages and sugar-sweetened beverages. Of the 4% inflation, 2.1 percentage points was accounted for by sin products and sugar-sweetened beverages. ”
For next year, inflation is seen to average at 3.2 percent.
