High inflation only temporary – DOF
The Department of Finance (DOF) said yesterday that the rise in inflation is only “temporary,” and remains manageable on the back of a robust Philippine economy.
In a statement, Finance Undersecretary Gil S. Beltran said that the implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) Law was not the cause of inflation, which already hit a five-year high in April.
According to Beltran, TRAIN, or the first tax reform law, is necessary to support funding for the government’s massive spending on the “Build, Build, Build” program and on social services.
Beltran, who is also the DOF’s chief economist, said increased spending on infrastructure and social services are made possible now with the aid of the TRAIN Law, which will keep inflation in check in the future.
He said moderate inflation is typical under a fast-growing economy like the Philippines, especially after the TRAIN Law, which raised salaries and helped boost government spending to pump prime the economy, increased demand or consumption, which, in turn, drove up prices.
“The current spike in inflation is only temporary. All these programs we are implementing, which are made possible because of the additional revenues from TRAIN, are meant precisely to prevent prices from rising further in the future,” Beltran said.
“TRAIN is a long-term measure that would push the economy to a much higher development path, create more jobs and improve the living conditions for our people,” he added.
The DOF official said the reforms being implemented by the Duterte administration have been recognized and lauded by international institutions, leading to strong investor confidence and better growth prospects for the economy.
“Standard and Poor's, for instance, upgraded our credit outlook from stable to positive, citing solid economic growth, healthy external position and improvements in policy-making,” Beltran said.
“This raises the possibility of a rating upgrade for the country. World Bank and ADB (Asian Development Bank), on the other hand, project a GDP growth close to 7 percent this year and the next,” he added.
Beltran pointed out that “the moderate impact of inflation is being mitigated by lower income tax rates and implementing cash transfers for the short-term, and; the health, education, social protection, and infrastructure programs in the medium- and long-term.”
As a result of TRAIN, disposable income rose about 15 percent on average for wageearners as income tax rates were reduced, Beltran said.
The TRAIN also provides for additional unconditional cash transfers (UCTs) to the poor and low-income earners amounting to R2,400 for 2018 and R3,600 for 2019 and 2020.