Maybank: Inflation to hit 3.9-4% by mid-2018 due to TRAIN Law

Inflation likely rose at a faster pace of 3.5 percent year-on-year in January mainly due to the impact on consumer prices of the higher excise taxes under the Tax Reform for Acceleration and Inclusion (TRAIN) Act, Maybank Group said on Monday.

Maybank Investment Bank group chief economist Suhaimi Ilias’ headline inflation forecast was higher than the 2.7 percent posted in January 2017 as well as the 3.3 percent in December 2017.

At 3.5 percent, it will be the fastest rate of increase in prices of basic goods since November 2017.

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

“The TRAIN is expected to push up the CPI [consumer price index] in 2018 to 3.6 percent from 3.2 percent in 2017,” Ilias told the Inquirer in an e-mail.

“We project the impact to peak in mid-2018 to around 3.9-4 percent year-on-year as consumers receive both the direct and indirect impact from TRAIN implementation,” Ilias added.

Signed by President Duterte in December, the TRAIN Law since January 1 jacked up or slapped new excise taxes on oil, cigarettes, sugary drinks, and vehicles, among other goods, to compensate for the restructured personal income tax regime that raised the tax-exempt cap to an annual salary of P250,000.

The Department of Finance sees inflation to have had risen 3.3 percent in January while the BSP projected it likely settled within the range of 3.5-4 percent.

In December, economic managers belonging to the Cabinet-level Development Budget Coordination Committee kept the 2-4 percent inflation target for 2018 despite the short-term inflationary impact of the TRAIN Law.               /kga