Inflation rate may hit as high as 3.2 percent in January, on higher fuel prices and after the government increased the excise tax rates on alcoholic beverage and tobacco products this month as a part of the Sin Tax Law.
Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said Thursday inflation rate would likely settle within a range of 2.3 percent to 3.2 percent in January, compared with 2.6 percent in December 2016.
“Downward price pressures include a slight decline in rice prices and lower power rates in Meralco-serviced areas,” Tetangco said in a text message.
“However, higher domestic prices of gasoline, diesel and LPG as well as the excise tax adjustments for alcoholic beverages and tobacco products would likely exert upside pressures on inflation during the month,” he said.
The tax on cigarettes went up to P30 per pack starting Jan. 1. The previous rates were P25 for brands selling for P11.50 and below and P29 for those selling above P11.50 per pack.
For beer, lager beer, ale, porter, and other fermented liquors, the levy increased to a uniform P23 per liter.
Tetangco said Bangko Sentral would continue to monitor emerging price conditions to ensure price stability conducive to a balanced and sustainable economic growth.
Bangko Sentral earlier said the tax reform package of the Finance Department, particularly the adjustment on fuel and automobile excise tax was expected to increase inflation, to nearly 4 percent in 2017 and 2018.
Bangko Sentral Deputy Governor Diwa Guinigundo said the first package of the tax reform proposal which would include the reduction of the personal income tax rate and some revenue-compensating measures would increase inflation rate by 0.4 to 0.5 percentage point in 2017 and 0.8 to 1 percentage point in 2018.
“All the numbers, our preliminary estimates, indicate that should it be implemented, the first package on fuel and automobile, that is expected to contribute between 0.4 to 0.5 percentage point for 2017,” Guinigundo said.
Latest data from the Philippine Statistics Authority showed inflation in 2016 settled at 1.8 percent, or below the government’s target of 2 percent to 4 percent.