Inflation hits 3-year high of 4% in January

MORE EXPENSIVE. The average prices of food rose by 4.5% in January 2018, the first month where higher excise taxes came into effect. File photo by Jay Directo/AFP

MORE EXPENSIVE. The average prices of food rose by 4.5% in January 2018, the first month where higher excise taxes came into effect.

File photo by Jay Directo/AFP

MANILA, Philippines – Inflation hit its highest level in 3 years last January as the effects of the Tax Reform for Acceleration and Inclusion (TRAIN) law kicked in.

"Increases in food and non-food prices pushed the country's inflation to 4% in January 2018, hitting the upper band of the government target," the Philippine Statistics Authority (PSA) said on Tuesday, February 6.

The level is higher than the 3.3% in December 2017 and the 2.7% in January 2017. In fact, it is the highest in 3 years since inflation quickened to 4.3% in October 2014.

The National Economic and Development Authority (NEDA) attributed the rise to the 4.5% increase in the food and non-alcoholic beverages segment, which constitutes 39% of the consumer price index (CPI).

"The push in inflation is partly due to TRAIN, considering particularly the excise on fuel and additional sin taxes," said Socioeconomic Planning Secretary Ernesto Pernia in a statement on Tuesday.

The alcoholic beverages and tobacco segment, which comprises only 2% of the CPI, recorded double-digit inflation, up to 12.3% from 6.4% in December 2017.

"With the initial inflationary effects of TRAIN, we must ensure faster provision of financial assistance through the unconditional cash transfer program," Pernia said.

"This will help the poorest 50% of Filipino households cope with the transitory impact of TRAIN on prices," he added. (READ: Poor families to get P200 tax reform subsidy starting January)

NEDA also attributed the faster price adjustments, particularly for fruits and corn, partly to the lingering effects of successive typhoons that hit the country in the last quarter of 2017.

'TRAIN effects temporary'

Pernia expects, however, that "the effects of TRAIN, which overhauled the country's tax system for the first time in two decades, would be minimal and temporary."

He added that "over the medium term, the fast-tracked infrastructure development in the next few years, including reforms in the energy sector, will ease electricity prices."

The non-food commodities that posted the highest inflation for January were transport at 3.2% from 2.4%, as well as restaurant, miscellaneous goods, and other services from 3% to 3.7%.

The prices of housing, water, electricity, gas, and other fuels, which combined account for about 22% of the consumer basket, slightly eased to 3.7% from 3.8%. NEDA said this partly offset the upward pressure on the prices of consumer goods. – Rappler.com