DOF sees inflation settling at 4.1% in March

MANILA, Philippines — Inflation likely accelerated to 4.1 percent last month based on 2012 prices, driven by higher tobacco, non-alcoholic beverages and energy costs, the Department of Finance (DOF) said yesterday.

In its latest economic bulletin, the DOF said the consumer price index (CPI) – under the rebased 2012 series – may have settled at 4.1 percent in March, faster than the 3.9 percent recorded the previous month.

This slightly surpasses the government’s four percent top end inflation target for the year, and up from the February 2017 rebased inflation level of three percent.

Under the old index based on 2006 prices, the DOF’s inflation forecast would reach five percent, also an acceleration from the 4.5 percent recorded in February.

This may be the fastest growth recorded in over seven years since the index settled at 5.2 percent in October 2011.

According to the DOF, the faster month-on-month inflation in March may be attributed mainly to the prices of tobacco products, which may have surged 8.27 percent.

“Sin products are significantly driving the inflationary pressure. Of the 4.1 percent forecast inflation rate for March, sin products account for as much as 0.5 percentage point, much higher than their contribution of only 0.16 percentage point in the same month last year,” the DOF said.

Other factors cited by the DOF are non-alcoholic beverages, which may have risen 2.51 percent, and electricity, gas and fuels, which likely increased 1.66 percent over the previous month.

Citing data from the Manila Electric Co., the DOF said electricity prices in March 2018 rose to P10.32 per kilowatt hour (kwh) from the February level of P9.47 per kwh.

Diesel prices in the National Capital Region (NCR) slightly declined to P41.15 per liter while gasoline prices climbed to P52.75 per liter, the DOF said.

Meanwhile, the agency said the year-on-year acceleration in inflation may have also been driven by the prices of cigarettes, which likely rose by 22.45 percent, as well as food and non-alcoholic beverages, which may have increased 5.25 percent.

“Sin products and non-alcoholic beverages were affected by temporary tax issues, while fish appears to be still affected by rough seas, and vegetables, by unfavorable weather,” the DOF said.

The DOF earlier said growth in tobacco prices was driven by the improved tax compliance of Mighty Corp., which is now under Japan Tobacco International Philippines Inc.

Excise taxes imposed on tobacco products also increased by P2.50 per pack under the Tax Reform for Acceleration and Inclusion Act, while sugar-sweetened beverages are now taxed under the same tax measure.

The Philippine Statistics Authority has shifted to the 2012 base year starting with the computation of the February inflation but is expected to release two series, including the 2006 base year, until June this year.

In its recent assessment, the Bangko Sentral ng Pilipinas’ Monetary Board raised its inflation forecast to 3.9 percent instead of 3.8 percent this year, while easing to three percent instead of 3.1 percent for 2019. These are within the two percent to four percent target set by the central bank for 2018 to 2020.