Full year-inflation seen at 3.6%

December 09, 2018

The country’s inflation rate is expected to decline further below 6 percent this month and even lower to 3.6 percent next year, even if the second tranche of the oil excise tax increase pushes through, an economist of a major Philippine bank said.

Emilio Neri Jr., vice president and lead economist of the Bank of the Philippine Islands (BPI), said the inflation projection even assumes a government decision to call off a plan to suspend the scheduled increase in oil excise taxes, as stipulated under the Tax Reform for Acceleration and Inclusion (TRAIN) Law.

“In other words, we will continue to have the excise taxes and yet, inflation will actually fall below 4 percent next year. Sounds very optimistic, but that’s our view,” he said Wednesday in a briefing.

Neri believes that the surge in oil prices, which contributed greatly to higher inflation, has already reached its peak, thus “we are now seeing a turn in inflation.”

Inflation rate eased to a four-month low of 6 percent in November after surging to 6.7 percent in September and October this year.

Inflation in January to November averaged 5.2 percent, above the high end of the government’s target range of 2 percent to 4 percent for the year.

“The movement of oil prices has a heavy influence on the way inflation in the Philippines moves. Now that oil (price) has fallen 35 percent in a span of five weeks, you should not be surprised why inflation will be back on target sometime in the middle of next year,” he said, describing this year as a “record-breaking performance” for oil.

President Rodrigo Duterte has approved the recommendation of the Development Budget Coordination Committee (DBCC) to proceed with the implementation of the second tranche of excise tax on fuel effective January 2019, considering the downward impact on inflation of the steep drop in the Dubai crude oil prices.

Neri further said the country will enter 2019 with above 5-percent inflation rate, the second quarter to below 5 percent, and the third quarter to below 4 percent.