Philippine Daily Inquirer

IN­FLA­TION HITS 5.2%, ABOVE GOV’T TAR­GET

The rate of in­crease in the prices of ba­sic goods and ser­vices surged to a five-year high in June, rais­ing prospects the Bangko Sen­tral ng Pilip­inas will raise in­ter­est rates for the third time this year.

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In­fla­tion picked up faster than ex­pected to 5.2 per­cent year-onyear in June, the high­est in more than five years, due to costlier food and “sin” prod­ucts, the gov­ern­ment re­ported on Thurs­day.

The Bangko Sen­tral ng Pilip­inas (BSP) vowed to get the in­fla­tion rate back to its 2-4 per­cent tar­get range amid in­creas­ing pres­sure for more in­ter­est rate hikes than the two made this year. (See story in Busi­ness, Page B1)

The Philip­pine Sta­tis­tics Author­ity (PSA) re­ported that June’s faster in­fla­tion was “pri­mar­ily brought about by higher an­nual rate posted in the heav­ily weighted food and non­al­co­holic bev­er­ages in­dex at 6.1 per­cent.”

June’s con­sumer price in­dex was above the 4.8 per­cent fore­cast in a Reuters poll of economists, bring­ing the av­er­age in­fla­tion rate to 4.3 per­cent in the first half of the year.

‘Man­age­able’

So­cioe­co­nomic Plan­ning Sec­re­tary Ernesto Per­nia told a news con­fer­ence that the June in­fla­tion rate was “rather un­ex­pected.”

“Most ob­servers and an­a­lysts did not ex­pect in­fla­tion to spike in this man­ner,” said Per­nia, who is also head of the state plan­ning agency Na­tional Eco­nomic and De­vel­op­ment Author­ity (Neda).

He said, how­ever, that he be­lieved the six-month av­er­age in­fla­tion rate of 4.3 per­cent re­mained “man­age­able.”

Mala­cañang said the faster in­fla­tion rate was “not some­thing to worry about.”

Pres­i­den­tial spokesper­son Harry Roque said the rise in in­fla­tion was due to “money go­ing around,” such as the spend­ing on the ad­min­is­tra­tion’s in­fra­struc­ture pro­gram.

He also cited the greater spend­ing power of the peo­ple as a re­sult of tax re­forms, and free tu­ition in state col­leges and uni­ver­si­ties.

PSA data showed that prices of al­co­holic bev­er­ages and tobacco climbed 20.8 per­cent in June; hous­ing, wa­ter, elec­tric­ity, gas and other fu­els, 4.6 per­cent; fur­nish­ing, house­hold equip­ment and rou­tine main­te­nance of the house, up 3 per­cent; trans­port, up 7.1 per­cent; com­mu­ni­ca­tion, up 0.4 per­cent; and ed­u­ca­tion, up 4 per­cent.

Third rate hike

Last month’s in­fla­tion print marked the fourth month that the pace of price in­crease was faster than the BSP’s 2-4 per­cent com­fort range for this year and next, leav­ing the door open for a third in­ter­est rate hike this year.

Ris­ing in­fla­tion, blamed on the en­force­ment of the Tax Re­form for Ac­cel­er­a­tion and In­clu­sion (TRAIN) Act start­ing Jan­uary, a weak peso and firmer global oil prices, has prompted the cen­tral bank to raise in­ter­est rates in May and June.

The TRAIN law raised the ceil­ing on tax-ex­empt in­come, but im­posed ex­cise on oil prod­ucts de­spite the value-added tax on fuel and slapped higher taxes on tobacco, al­co­hol and other so-called sin prod­ucts.

Un­der the TRAIN law, the ex­cise on cig­a­rettes rose to P32.50 per pack ef­fec­tive Jan. 1 from P30 a pack last year.

Also, ex­cise slapped on al­co­holic drinks go up ev­ery year un­der the Sin Tax Re­form Law of 2012.

Food prices

Start­ing July, the ex­cise on cig­a­rettes will fur­ther rise to P35 per pack, as re­quired by the TRAIN law.

Im­proved tax com­pli­ance by Mighty prod­ucts, now owned by Ja­pan Tobacco In­ter­na­tional, had also been blamed by the De­part­ment of Fi­nance (DOF) for push­ing ci­garette prices higher, as cor­rect tax pay­ments el­e­vated the brand’s re­tail prices.

The food-alone in­dex rose 5.8 per­cent in June, due to price in­creases in rice (up 4.7 per­cent); corn (up 14.1 per­cent); other ce­re­als, flour, ce­real prepa­ra­tion, bread, pasta and other bak­ery prod­ucts (up 2.4 per­cent); meat (up 5 per­cent); veg­eta­bles (up 8.6 per­cent); sugar, jam, honey, choco­late and con­fec­tionery (up 3.9 per­cent); and other food prod­ucts (up 3.1 per­cent).

At the end of the first half of the year, head­line in­fla­tion av­er­aged 4.3 per­cent, be­yond the gov­ern­ment’s 2-4 per­cent tar­get range.

Head­line in­fla­tion in the Na­tional Cap­i­tal Re­gion picked up faster by 5.8 per­cent in June from 4.9 per­cent in May, while the rate out­side Metro Manila climbed to 5.1 per­cent from 4.6 per­cent in the pre­vi­ous month.

Per­nia said in­fla­tion could peak in the third quar­ter and ta­per off in Oc­to­ber.

But he told re­porters later that the gov­ern­ment was still “hop­ing that the peak­ing hap­pened al­ready, then maybe plateau in the next quar­ter” as more rice im­ports ar­rive to bring down do­mes­tic prices, while global oil prices be­gin to soften as an in­crease in pro­duc­tion in Rus­sia and Saudi Ara­bia make up for the sanc­tions im­posed on ma­jor pro­duc­ers Venezuela and Iran.

Rice im­ports

Neda Un­der­sec­re­tary Rose­marie Edil­lon said that “if oil prices were taken out as a driver of in­fla­tion, we see mod­er­a­tion of in­fla­tion.”

As for rice prices, Edil­lon said the first shipments of the Na­tional Food Author­ity’s rice im­ports had ar­rived “so it will ease an­other driver of in­fla­tion.”

On Mon­day, eco­nomic man­agers con­ceded that in­fla­tion would likely breach the tar­get for 2018, as they adopted the BSP’s fore­cast of 4-4.5 per­cent for the en­tire year.

While keep­ing the 2-4 per­cent in­fla­tion tar­get for the pe­riod 2018-2020, the Cabi­netlevel De­vel­op­ment Bud­get Co­or­di­na­tion Com­mit­tee jacked up its pro­jected rate of in­crease in prices of ba­sic goods for this year from the ear­lier fore­cast of 2-4 per­cent dur­ing its pre­vi­ous meet­ing in April.

For the pe­riod 2019-2022, the yearly in­fla­tion fore­casts were kept at 2-4 per­cent.

 ?? —JAMSTA. ROSA ?? HIGHER PRICES The gov­ern­ment’s lat­est bul­letin an­nounc­ing a 5.2-per­cent in­fla­tion rate in June will likely trig­ger a fresh round of in­creases in veg­etable prices at QMart in Que­zon City. Con­sumer price in­dex last month was above the 4.8-per­cent fore­cast in a Reuters poll of economists.
—JAMSTA. ROSA HIGHER PRICES The gov­ern­ment’s lat­est bul­letin an­nounc­ing a 5.2-per­cent in­fla­tion rate in June will likely trig­ger a fresh round of in­creases in veg­etable prices at QMart in Que­zon City. Con­sumer price in­dex last month was above the 4.8-per­cent fore­cast in a Reuters poll of economists.

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