MANILA — IHS Markit, a global leader in information, analytics and solutions for the major industries, foresees the country’s headline inflation in the first month of the year will increase to 3.9 percent from 3.3 percent in December 2017.
IHS Markit Asia Pacific Chief Economist Rajiv Biswas, in an e-mail Friday, said the newly implemented Tax Reform for Acceleration and Inclusion (TRAIN) Law has pushed inflationary pressures in January 2018.
“The Philippines headline CPI (consumer price index) inflation rate is expected to surge higher in January due to higher impact of sharp rises in retail petrol prices following a spike in world oil prices in 2017 and higher excise tax on fuel,” said Biswas.
“The TRAIN tax reform package will also push up indirect taxes on certain other specific products such as sweetened drinks,” the economist added.
The government roll out the TRAIN Law at the start of the year.
To counter government revenue losses from lowering personal income tax rate, the TRAIN Law imposes higher excise tax on fuel products — PHP2.50 per liter on diesel and PHP7 per liter for regular and unleaded premium gasoline.
It also slaps sugar-sweetened beverage (SSB) tax of PHP6 per liter on beverages using caloric and non-caloric sweeteners while higher SSB tax of PHP12 per liter for those using high fructose corn syrup.
On the other note, Biswas expects the Bangko Sentral ng Pilipinas (BSP) to adopt a more hawkish stance on its monetary policy this year.
“With headline CPI inflation expected to rise towards the upper end of the BSP target range during 2018, the BSP Monetary Board is expected to tighten monetary policy by 25bps (basis points) in first quarter of 2018, most likely at its 8th February meeting, with a second rate hike expected in second quarter of 2018,” the IHS Markit economist said.
Meanwhile, the government will be releasing its inflation rate data next week.