NEDA considers TRAIN having little effect on inflation  

March 1, 2018

Officials of NEDA ( National Economic Development Authority), the Department of Finance (DOF), Bangko Sentral ng Pilipinas (BSP), and economists attending the meeting of the Senate Committee on Economic Affairs, led by Sen. Win Gatchalian, agree that several factors have pushed inflation up in January, and the tax reform law that has recently taken effect has little to do with it.

Socioeconomic Planning Secretary Ernesto Pernia said based on the agency’s calculations, only 0.7 percent (at most) of inflation for 2018 is attributable to the effects of the Tax Reform for Acceleration and Inclusion (TRAIN) law. NEDA said in a press statement Thursday,.

At the Senate hearing, the DOF said among these factors are the increase in the prices of crude oil in the international market and the drop in the exchange rate. NEDA took note of the rise in the price of rice which accounts for around 22 percent of the consumers’ basket.

“We have to closely monitor the buffer system of rice to ensure that there is no considerable spike in the price of rice,” Pernia said.

NEDA Undersecretary for Policy and Planning Rosemarie Edillon also attributed the increase in the prices of food commodities such as corn and meat to typhoons that hit the country in December last year.

“Part of the reason for the recent inflation is expectations that the tax reform will indeed increase prices. These inflationary expectations can be tempered by further increasing the supply of goods and services.  This can be done by encouraging more investments or for existing firms to expand production.  For these, the second round of tax reform, or TRAIN 2, is critical.  This should be accompanied by the passage of the ease of doing business law,” Edillon said.

“It is also possible that certain merchants have taken advantage of the situation by raising the prices of their goods prematurely. It was so easy to point a finger at TRAIN,” Pernia pointed out.

With the active lead of the Department of Trade and Industry, the government should be forceful in going after businesses manipulating the prices of goods to the disadvantage of the public, Pernia added. DMS