TRAIN law to boost inflation rate this year

Lorrianne Aryenz V. Valdecantos | January 8, 2018

Photo from GETTY IMAGES

Last year was highest inflation rate recorded in the last three years, we are looking at a 3.2% rise, almost triple the 1.8% in 2016 and 1.4% in 2015. Though this year and even on the following years, economists expect that inflation rate to sail through steady waves of 3.2% to 3.4%, it is still on the 2 to 4% increase target of the government through the year 2018 to 2020.

When President Rodrigo Roa Duterte signed the first package of Tax Reform for Acceleration and Inclusion (TRAIN) law in December 19 of last year, many economists already have their bets on what would happen after its implementation, one of those is the steady rise on the price of goods.

TRAIN law basically reforms the personal income taxes of Filipinos, slashing pesos off taxes, thus enabling people to take home higher amount of hard-earned cash but, along with this is adding new taxes to other goods like sugary beverages, oil, and cigarettes.

The law promises a domino-like effect on the economy of the country. With this law, there will be more funds to make infrastructures better, thus speeding up the growth of the economy, it also aims to aid the farmers by allocating more funds to our farming systems, promoting agriculture.

“The tax reform would allow the government to fund infrastructure projects and in the process increase our potential output and in the end enhance the supply situation and mitigate price pressures,” said Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo

Tight monetary policy should be expected from the BSP to ensure that these shifts of policies and taxes will be accommodated and their original plan to secure growth of the economy through constructions of more infrastructures will happen in due time.

Though it might be a big leap for the country, the steadiness of the law and its fundamentals along with other factors like rice reforms and the Build Build Build Program will promise a five to seven percent of growth to the Philippines and therefore will be able to sustain and manage inflations this year.