{"id":144135,"date":"2018-01-06T03:11:08","date_gmt":"2018-01-06T08:11:08","guid":{"rendered":"https:\/\/canadianinquirer.net\/v1\/?p=144135"},"modified":"2018-01-06T03:11:08","modified_gmt":"2018-01-06T08:11:08","slug":"economists-differ-on-trains-impact-on-inflation-rate","status":"publish","type":"post","link":"https:\/\/canadianinquirer.net\/v1\/2018\/01\/06\/economists-differ-on-trains-impact-on-inflation-rate\/","title":{"rendered":"Economists differ on TRAIN\u2019s impact on inflation rate"},"content":{"rendered":"
\"Economists<\/a>
Economists are divided on the possible impact of the first tax reform package on Philippines\u2019 inflation rate this 2018, with some saying the effect will be limited while some raised the possibility of breaching of the target. (Pixabay photo)<\/figcaption><\/figure>\n

MANILA – – Economists are divided on the possible impact of the first tax reform package on Philippines\u2019 inflation rate this 2018, with some saying the effect will be limited while some raised the possibility of breaching of the target.<\/p>\n

BPI lead economist Jun Neri, in a Tweet Friday said: \u201chigher excise taxes on oil may not bring us to 4.0 percent headline (inflation) anytime soon.\u201d<\/p>\n

On the other hand, ANZ Research, in a study, said\u00a0 implementation of the Tax Reform for Acceleration and Inclusion\u2019s (TRAIN) first package provides additional upside risks on inflation this year.<\/p>\n

\u201cIn our view, the tax adjustments will likely push the inflation above the central bank\u2019s target range,\u201d it said, referring to the government\u2019s two to four percent target range for 2018 and 2019.<\/p>\n

The study explained that even before the tax reform\u2019s first package was signed into law, upside risk on inflation was seen to come from increase in public transport fares.<\/p>\n

Since TRAIN\u2019s first package increases excise taxes on fuel, among others, it is seen to result to higher prices of utilities, tobacco and sweetened beverages, with the latter due also to higher taxes of sugary drinks.<\/p>\n

Citing estimates by the Department of Finance (DOF), the study said the tax reform\u2019s impact on inflation is only around 0.4-0.8 percent.<\/p>\n

It, however, pointed out that \u201cthese estimates take into account the direct and not secondary impact of the tax reforms.\u201d<\/p>\n

\u201cOnce again, considering the strength of domestic demand, a meaningful secondary impact cannot be ruled out,\u201d it said.<\/p>\n

With inflation seen to rise beyond the government\u2019s target range, ANZ Research projects the BangkoSentralngPilipinas (BSP) to\u00a0 hike its key rates this year, at 25 basis points each in March and May, as it expects credit growth and trade deficit to increase further.<\/p>\n

To date, rate of the BSP\u2019s reverse repurchase (RRP) facility is three percent, the repurchase (RP) facility is 3.5 percent and the special deposit account (SDA) facility, 2.5 percent.<\/p>\n

For his part, BDO chief strategist Jonathan Ravelas said impact of the tax reform should not be the only focus this year\u00a0 vis-\u00e0-vis inflation\u00a0 since there are other major factors to consider, particularly the global trend of rising commodity prices.<\/p>\n

In an interview by PNA, Ravelas said DOF\u2019s estimates on the TRAIN\u2019s impact on domestic rate of price increases are based on constant prices and not the impact of changing prices not only here but overseas.<\/p>\n

He said the cut in personal income tax in the country would provide people additional cash but with prices of commodities rising people would tend to cut back on their spending and play defensive.<\/p>\n

Overseas, some central banks such as the US\u2019 Federal Reserve,\u00a0 the European Central Bank (ECB) and the Bank of Canada have started to increase their respective key rates after implementing bond-buying program a few years back.<\/p>\n

Revelas said these two factors will eventually result to faster inflation rate, thus, the need for the BSP to intervene through hike in its key rates or for the government to allow the peso to strengthen.<\/p>\n

He said a stronger peso will be beneficial to most Filipinos since, for one, it will allow domestic oil players to have more value for their peso, thus, providing them more capacity to buy oil from abroad at a cheaper cost.<\/p>\n

He said strengthening of the local currency will be beneficial to most Filipinos because it will lessen the impact of hikes in commodity prices.<\/p>\n

\u201cA stronger peso could be there to support TRAIN because it will also encourage more foreign investors to investment in the country,\u201d he added.<\/p>\n","protected":false},"excerpt":{"rendered":"

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