ASEAN KEY DESTINATIONS
Inflation to hit 3% in first half of 2017
Inflation is expected to settle in the middle of the central bank’s 2- to 4-percent target range in the first six months of the year, given that oil prices have stabilized and the food supply has improved, according to the latest edition of "The Market Call."
“We expect headline inflation to hit 3 percent and hover around it in H1 as crude oil prices have stabilized at current levels while food supply should improve with better agricultural performance and early rice imports,” according to the joint publication of First Metro Investment Corp. (FMIC) and University of Asia and the Pacific (UA&P).
Just last month, the Monetary Board of the Bangko Sentral ng Pilipinas (BSP) raised its inflation outlook to 3.5 percent for 2017, from 3.3 percent it announced in December.
“There are several reasons for the forecast, one is oil prices. The Board also considered that the exchange rate has depreciated in the last quarter of 2016,” BSP Deputy Governor Diwa C. Guinigundo said at that time.
“With inflation hovering 3 percent for the rest of H1, external factors and investor sentiment should drive the bond market,” according to The Market Call.
It noted a different inflation scenario in the second half of the year.
“The outlook for H2 may be less sanguine if the proposed excise taxes on petroleum products become effective then,” it said.
The government wants to increase the excise tax on petroleum products by more than double to raise additional revenue. It proposed to raise the excise tax on gasoline to P10.00 per liter from P4.35, and impose P6.00 per liter on diesel which currently has no excise tax.
Lawmakers, however, opposed the proposals in the absence of a financial crisis that would justify the need higher and additional excise taxes.
Socioeconomic Planning Secretary Ernesto M. Pernia defended the government's proposed tax reform program. "As expected, economic reforms are typically non-populist. Short-term satisfaction (often narrow), usually preferred to wide long-term benefits." — Jon Viktor Cabuenas/VDS, GMA News
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