DOF official: TRAIN law not the cause of July inflation

A Department of Finance (DOF) official has blamed high prices of imported crude oil and rice as the factors that caused the spike in inflation in July, and not the Tax Reform for Acceleration and Inclusion (TRAIN) law.

“I don’t think so, because how much is diesel today?  I think P14 more expensive than December, Train only added P2.50 per liter,” DOF Undersecretary Karl Chua said in an interview with reporters after the House hearing on Tuesday.

The government reported  that the inflation rate of 5.7 percent in July is a five-year high, with the seven-month average surpassing the government’s range of 2 to 4 percent for the whole year of 2018.

Economists have projected a faster inflation since the excise taxes brought by the Train law took effect, and after the fare hike of jeepneys.

READ: Inflation peaks to new over 5-year high of 5.7% in July

However, according to Chua, prices of commodities will likely fall in the coming months as the rate has slowed down, despite an increase on a year-on-year basis.

“(Inflation) Year-on-year is higher, month-on-month has fallen, signifying maybe the start of price stabilization, the situation is largely similar to June, the main drivers are international adjustment in oil pass, some pass through from the exchange rate, also because of the scarcity of fish,” he said.

Chua added that they have observed that in regions where the agriculture industry is flourishing, inflation is not as high as the nationwide figures.

“Rice is still in the top contributor to inflation.  Surprisingly, one region recorded 2.7 percent inflation — Central Luzon, signifying that a very productive rice sector and agriculture is key to bringing food prices down,” he explained.

“We will learn from that and move the rice tariffication bill faster […] So you can see the far majority is not Train.  It is the international price that is causing the inflation,” he added.

The undersecretary said that despite the rice imports in June, prices are still high because of the rainy season.

“It also rained, almost every day since June.  So we don’t want to ship them if they will be wet and spoiled, they’re moving but kulang pa (still lacking), we will distribute faster after the rain has stopped,” Chua said. /ee

READ: Rice prices continue to soar