ANALYSTS were not too worried about the uptick in prices that would almost certainly follow the second phase of government’s tax reform law amid jitters that it would push inflation past the 2 to 4 percent target for 2018-2019.
Inflation is expected to be elevated in the coming months but would start to go down in the third quarter of the year, and will finally normalize around March 2019, Bangko Sentral ng Pilipinas said.
The central bank’s average inflation projection for 2018 remains at 3.9 percent, which is seen to settle down to 3 percent next year.
ING Bank Manila senior economist Joey Cuyegkeng, in a research note, said ING Bank economists “believe that modest second-round effects are already incorporated in BSP’s inflation forecast.”
“BSP forecasts a return to the target range over the policy horizon by early 2019 with its 3 percent 2019 inflation outlook from 2018 forecast of 3.9 percent,” Cuyegkeng said.
“We are more pessimistic than the consensus forecast with our 4.3 percent forecast (against consensus of 4 percent) this year and 3.7 percent next year (against consensus of 3.5 percent),” he added.
In the first quarter this year, inflation averaged at 3.8 percent – higher than the 3 percent in the previous quarter and 2.9 percent in the first three months of 2017.
The inflation spike was traced to the rise in prices of alcoholic beverage and tobacco products (15.9 percent) because of higher “sin taxes,” as well as food prices (5 percent) due to bad weather.
In the same period, prices of nonalcoholic beverage rose 4.6 percent on account of the newly introduced excise tax on sugar-sweetened beverages. (PNA)
