‘TRAIN effects to be felt in May 2018’

MANILA, Philippines — Households will have to brace for higher prices of consumer goods as economic managers told a Senate inquiry yesterday that inflationary effects of the Tax Reform for Acceleration and Inclusion (TRAIN) law might be felt from May to August this year.

At the hearing of the Senate committee on economic affairs, officials of the Department of Finance (DOF) and Bangko Sentral ng Pilipinas (BSP) pointed out that the current spike in prices was not caused by the new tax law but by peso depreciation, fluctuating oil prices and lower agricultural production due to bad weather conditions.

“We will see the full effect of TRAIN in terms of inflation come May. All the way until August, this is really the timetable wherein we will feel the effects of tax reform but as of now we don’t feel it yet,” said Sen. Sherwin Gatchalian, committee chairman.

However, BSP managing director for monetary policy Francisco Dakila Jr. qualified that the effect of TRAIN on inflation is only “moderate” at 0.43 percent.

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On certain sectors, the effect of the new taxes on oil is 0.16 percent; 0.01 percent on tobacco products, electricity and coal and 0.15 percent on sugar.

“We don’t foresee a surge in prices (due to TRAIN),” Dakila told the panel, adding that the government maintains its forecast of 4.3 percent inflation for this year.

He believes that the increase in prices is transitory and inflation will stabilize at 3.5 percent in the first quarter of 2019.

Finance Undersecretary Gil Beltran told the committee that this early, some traders are unduly increasing prices using TRAIN as an excuse.

To minimize the impact, Gatchalian prodded the DOF and other agencies to hasten the implementation of mitigating measures of TRAIN, including the P200 monthly subsidy for the 10 million poorest families in the country. He also pushed for discounts in fares and rice for poor families.

Senate President Pro Tempore Ralph Recto said the government should see to it that rice prices would not spike by flooding the market with the fourth quarter bumper palay harvest, explaining that stabilizing rice prices is the only way to calm the public’s fear that TRAIN triggered an uptick in the prices of goods.

People are using rice as the price barometer, he added.

“No matter how many graphs government economists will show, the people will use rice price tags as the gauge of inflation,” Recto said.

He added that the P200 monthly TRAIN subsidy to be given to 10 million households is just enough to buy three days’ worth of rice, if based on a recent government survey that well-milled rice is being retailed at an average of P42.83 per kilo and regular milled rice at P39.01.