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Expectations mount for above-4% inflation rate

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‘Sin’ products -- cigarettes and liquor, whose excise tax rates rose under the first of up to five planned tax reform packages -- ‘are significantly driving inflationary pressures’, the Finance department noted.

THE DEPARTMENT of Finance (DoF) expects headline inflation to have breached the central bank’s full-year target last month, saying it likely picked up at its fastest pace in over three years due to upticks in prices of tobacco and non-alcoholic drinks.

The DoF said in its latest economic bulletin published yesterday that headline inflation likely clocked 4.1% in March from 3.9% in February and 3.1% a year prior, breaching the Bangko Sentral ng Pilipinas’ 2-4% target band for the entire 2018 but near the midpoint of the 3.8-4.6% estimate for the month which the central bank gave late last week.

If realized, this would be the fastest rate since August 2014’s 4.2%.

The DoF’s forecast is a tad lower than the 4.2% median estimate in BusinessWorld’s poll of nine economists.

Using the old 2006 base prices, the DoF said that inflation for March likely stood at five percent, which would be the fastest since October 2011’s 5.2% using the same base.

The Philippine Statistics Authority is scheduled to report official inflation data today.

“The month-on-month price change which slowed to 0.24% on average from 0.79% last month and 0.88% in January comes largely from tobacco which rose 8.27%, non-alcoholic beverages which rose 2.51% and electricity, gas and fuels which rose 1.66% over the previous month,” the DoF said.

“‘Sin’ products are significantly driving the inflationary pressure. Of the 4.1% forecast inflation rate for March, ‘sin’ products account for as much as 0.5 percentage point, much higher than their contribution of only 0.16 percentage point in the same month last year,” the Finance department added, referring to tobacco and alcoholic beverages whose excise tax rates increased under the first of up to five planned tax reform packages that took effect on Jan. 1.

DoF also said food and non-alcoholic beverages contributed 2.08 points to inflation.

“‘Sin’ products and non-alcoholic beverages were affected by temporary tax issues while fish appears to be still affected by rough seas, and vegetables by unfavorable weather.” — EJCT