January inflation seen within target

Inflation likely rose faster in January from a year-ago and a month-ago rates partly due to the impact of the higher taxes on consumption under the Tax Reform for Acceleration and Inclusion (TRAIN) Law.

Economists polled by the Inquirer last week projected the rate of increase in the prices of basic goods last month to exceed the 2.7-percent rise in January last year as well as the 3.3 percent in December but still within the government’s target range of 2-4 percent for 2018.

The government will release the January inflation figure on Tuesday, ahead of the first meeting on the monetary policy stance for 2018 of the Bangko Sentral ng Pilipinas’ Monetary Board on Thursday.

The highest forecast was 3.9 percent year-on-year by IHS Markit Asia-Pacific chief economist Rajiv Biswas.

“The Philippines’ headline CPI [consumer price index] inflation rate is expected to surge higher in January due to the impact of sharp rises in retail petrol prices following a spike in world oil prices at the end of 2017 and higher excise taxes on fuel. The TRAIN tax reform package will also push up indirect taxes on certain other specific products such as sweetened drinks,” Biswas explained.

Nomura economist Euben Paracuelles said his projection was 3.8 percent due to the combined effects not just from the TRAIN, but also higher oil prices and elevated demand conditions because of the strong economy.

Eugenia F. Victorino, ANZ Research economist for South and Southeast Asia, projected 3.7 percent.

Land Bank of the Philippines market economist Guian Angelo S. Dumalagan’s forecast was 3.5 percent, noting that the costs of many goods and services surged amid the recently passed TRAIN Law, the depreciation of the peso and the recovery in global oil prices.

Capital Economics Asia economist Alex Holmes, DBS Bank Ltd. economist Gundy Cahyadi and Ateneo de Manila University economics professor Alvin P. Ang projected 3.4 percent.

Oxford Economics economist Beatrice Tanjangco said they projected an average inflation rate of 3.5 percent in the first quarter.

“The feed-through of the [tax] reform should take some time. The more immediate channels would be through oil prices, which are already edging higher without the reform,” she explained.