Philippines Inflation Fastest in Over Three Years

Inflation accelerated to 4% in January, the fastest in over three years, largely driven by the first round effects of the government’s tax reform program. According to the Bangko Sentral ng Pilipinas, headline inflation was recorded at 4% in January. This is the fastest since the 4.3% logged in October 2014.

This also compares with the 2.7% in January 2017, and the 3.3% in December of the same year, GMA News reported.

The 4% inflation rate is “due mainly to combined first round effects of TRAIN, oil prices, and food to some extent,” Bangko Sentral ng Pilipinas Governor Nestor Espenilla, Jr. said in a text message to reporters.

President Rodrigo Duterte signed the Tax Reform for Acceleration and Inclusion (TRAIN) into law in December, which then took effect last month. Under TRAIN, the government cut down the personal income tax rate, but it expanded the value-added tax base.

“We think these are temporary drivers of inflation and would eventually stabilize,” Espenilla said. “Nevertheless, BSP will be closely monitoring the situation and stand ready to take timely action based on our evaluation of all relevant data,” he added.

The BSP earlier announced an inflation outlook of 3.5 to 4% in January.

The January figure remained within the government’s 2% to 4% inflation target for the whole of 2018. The Philippines posted 3.2% inflation for 2017. The government agency said the government must ensure “mitigation measures” such as financial aid to poor families, and clamp down on profiteering to cushion the effects of the tax measures.

The tax fallout should be “minimal and temporary” and the country would soon experience the benefits of improved infrastructure spending, it added.

Meanwhile, the government is targeting business aviation as a potential driver of growth for the economy, especially in and around Clark and Subic Bay.

Clark International Airport and Subic Bay International Airport, which are former US military bases, continue to be underutilized, while Manila’s Ninoy Aquino International Airport suffers from slot constraints and congestion. 

Manila Airport, which is primarily a commercial airport, currently has capacity for 42 aircraft movements per hour, of which only two are allocated for general aviation and business aviation, says Benjamin Lopez, head of the Philippine chapter of the Asian Business Aviation Association. He is also president of INAEC Aviation, a fixed-based operation in the Philippines that also operates and manages aircraft.

The Philippine government is targeting business aviation as a potential driver of growth for the economy, especially in and around Clark and Subic Bay.