Inflation likely hit a fresh over five-year high of 4.5 percent in April on the back of sustained higher prices of food, cigarettes and alcoholic drinks, the Department of Finance said Thursday.
The country’s chief economist nonetheless said that even as the rate of increase in prices of basic goods likely further rose from 4.3 percent in March, it is seen softening towards the end of the year.
“I think [high inflation] will continue to be an issue throughout most of the year. It will start to peter out during the last quarter of the year,” Socioeconomic Planning Secretary Ernesto M. Pernia told reporters on the sidelines of the 51st annual meeting of the Manila-based Asian Development Bank.
Pernia, who heads the state planning agency National Economic and Development Authority, attributed the prevailing high inflation environment to rising oil prices, as well as the impact of the Tax Reform for Acceleration and Inclusion (Train) Act.
Signed by President Duterte in December, Republic Act No. 10963 or the Train Law since Jan. 1 this year jacked up or slapped new excise taxes on cigarettes, sugary drinks, oil products 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.
In an economic bulletin, Finance Undersecretary Gil S. Beltran attributed his forecast to “elevated food prices (such as rice and fish) and higher prices of non-alcoholic beverages and ‘sin’ products.”
“Non-food items also contributed to the uptick albeit at a slower pace,” added Beltran, who is also the DOF’s chief economist.
“Sin products continue to drive inflationary pressure. Of the 4.5-percent forecast inflation rate for April, sin products account for as much as 0.5 percentage point (despite contributing only 1.6 percent to the consumer price index), much higher than their contribution of only 0.16 percentage point in the same month last year,” according to Beltran.
Under the Train Law, the unitary excise tax slapped on cigarettes already rose to P32.50 per pack effective Jan. 1 from P30 a pack last year.
The Train Law mandated a further hike in the cigarette excise tax rates to P35 per pack from July 1, 2018 to Dec. 31, 2019; P37.50 a pack from Jan. 1, 2020 to Dec. 31, 2021; and P40 from Jan. 1, 2022 to Dec. 31, 2023.
The excise tax rates slapped on alcoholic drinks also increase every year under the Sin Tax Reform Law of 2012.
In the first quarter, headline inflation averaged 3.8 percent, near the upper end of the government’s target range of 2-4 percent.
The government will release its April inflation report on Friday.