INFLATION may have picked up further in February to settle above four percent as prices reflect the full impact of higher levies under the recently enacted tax reform, the central bank said yesterday.

In a statement, the Bangko Sentral ng Pilipinas (BSP) Department of Economic Research said inflation likely ranged 4-4.8% last month. This meant that price increases will go beyond the 2-4% target range set by the central bank.

“Higher electricity rates and food prices — along with the full pass-through of higher excise taxes on petroleum products and sugar sweetened beverages — could lead to upward price pressures for the month of February,” the central bank said late Wednesday.

If realized, February’s inflation will pick up from January’s four percent — the fastest since October 2014’s 4.3% — and the 3.3% reading in February 2017.

The Philippine Statistics Authority will report official inflation data on Tuesday.

Power distributor Manila Electric Co. announced a P1.08 per kilowatt-hour (/kWh) increase for bills last month, but said that it will initially implement a 75-centavo/kWh increase to soften the impact among consumers. The overall February rate stands at P9.47/kWh versus P8.72/kWh in January, with the remaining 33-centavo increase to be reflected in customers’ March bill.

On the other hand, February prices will now reflect the full blow of Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion (TRAIN) Act, that imposed additional taxes on fuel, cars, coal, sugar-sweetened drinks and a host of other items.

Among others, TRAIN imposed an additional P2.50 excise tax per liter of diesel and P3/liter of kerosene, which came at a time of three-year highs for world crude prices.

The new law also introduced a P6/liter excise tax on drinks containing caloric or non-caloric sweetener and P12/liter on drinks containing high-fructose corn syrup.

Central bank officials have said that the faster-than-expected price spikes in January already reflected the impact of TRAIN as it took effect on Jan. 1.

The Department of Finance said that the new taxes will have a “very minimal and manageable” impact, saying that it will raise inflation by some 0.7 of a percentage point (ppt).

The increase will be largely due to higher oil prices, which in turn will drive food costs up by 0.3ppt and 0.1ppt.

January inflation coupled with anticipated second-round effects of the tax reform law prompted the BSP to raise its inflation forecast to 4.3% for 2018, piercing a 2-4% full-year target range.

BSP Governor Nestor A. Espenilla, Jr. said monetary authorities are “watchful” of TRAIN’s second-round inflation effects that include petitions for higher transport fares and minimum wages.

Analysts expect inflation to keep rising until June before easing to within-target levels. Monetary authorities expect average inflation to settle back down to 3.5% in 2019, saying current drivers of inflation will be “short-lived.” — Melissa Luz T. Lopez

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