Inflation is 'manageable' even with Train: DOF

MANILA -- The Department of Finance (DOF) called the uptick in inflation that immediately followed the implementation of the Tax Reform for Acceleration and Inclusion (Train) law, "moderate" or at "manageable" levels.

According to a statement issued Friday, finance undersecretary and chief economist Gil Beltran said the tax reform law would support funding for the government's massive infrastructure program and social services, which are meant to keep inflation in check in the future. “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 chief economist said the effect of inflation is cushioned by lower tax rates and cash grants for the short term, as well as health, education, social protection, and infrastructure programs for the long term. The Train law, which lowers the personal income tax of salary earners, led to higher disposable income averaging at a 15-percent increase.

Beltran warned that suspending the Train law might affect the increased government spending on health, which will reach P107.3 billion this year, along with education, P672.4 billion; social protection, PHP141.4 billion; infrastructure, P704.2 billion; the 100 percent hike in the salaries of the military, which is equivalent to P62.8 billion; and spending for the free college tuition program, P51.4 billion.

Based on DOF data, Train's effect only made a direct impact on the prices of certain goods, such as non-alcoholic beverages, tobacco, electricity, gas, and other fuels, and transportation. Train also pushed up inflation by only 0.4 percentage point, which is comparably lower than DOF estimates of 0.7 percentage point. Other factors, such as the rise in global oil prices and the better collection of cigarette excise taxes, drove inflation to 4.5 percent in April this year.

Beltran pointed out that while inflation reached 4.5 percent in April, month-to-month inflation, however, declined from 1 percent in January to only 0.5 percent in April. Year-to-date inflation was recorded at 4.1 percent by the DOF.

“This suggests a potential easing of inflation moving forward. The Bangko Sentral ng Pilipinas expects inflation to temper and settle to 3.9 percent in 2018 and decelerate further to the midpoint of the target range (of 2 percent to 4 percent) in 2019,” Beltran said. (PNA)