Taming Inflation: Drivers and Options

ASOG WORKING PAPER 18-07

20 Pages Posted: 12 Nov 2018

See all articles by Jerome Patrick Cruz

Jerome Patrick Cruz

Department of Economics, Ateneo de Manila University; Ateneo de Manila University

Ronald U. Mendoza

Ateneo De Manila University - Ateneo School of Government

Ayn G. Torres

Ateneo School of Government - Ateneo de Manila University

Date Written: October 20, 2018

Abstract

Inflation in the Philippines has accelerated over the course of 2018, with year-on-year headline inflation rising from 2.9 percent in December 2017 to 6.7 percent as of September 2018. Amidst such trends, calls have been sounded for the advanced suspension of scheduled increases in oil levies planned by R.A. 10963 (the TRAIN Law) for 2019 and 2020. In fact, the Duterte administration has reportedly began undertaking steps to suspend the next tranche of increases in fuel excise taxes.

This policy note provides an overview of the main factors shaping the country’s present inflation dilemma, and are likely to continue molding the country’s price outlook for the foreseeable future. While we tackle issues related to the TRAIN law and role of self-fulfilling expectations, we focus especially on the drivers and potential responses to rice and food price changes, given the inordinate repercussions of such inflationary dynamics on the poor and near-poor. Overall, we highlight the cost-push dimensions underlying recent inflation trends in the country, in order to emphasize various supply-side responses that are necessary to mitigate the burden of price changes, particularly on poorer households.

Keywords: Philippine economy, inflation, food price inflation, rice policy, tax reform

JEL Classification: E31, N15, Q18

Suggested Citation

Cruz, Jerome Patrick and Mendoza, Ronald U. and Torres, Ayn G., Taming Inflation: Drivers and Options (October 20, 2018). ASOG WORKING PAPER 18-07. Available at SSRN: https://ssrn.com/abstract=3270201 or http://dx.doi.org/10.2139/ssrn.3270201

Jerome Patrick Cruz

Department of Economics, Ateneo de Manila University ( email )

P.O. Box 154
Manila
Philippines

Ateneo de Manila University ( email )

P.O. Box 154
Manila
Philippines

Ronald U. Mendoza (Contact Author)

Ateneo De Manila University - Ateneo School of Government ( email )

Katipunan Road
Loyola Heights
Quezon City, 1108
Philippines

Ayn G. Torres

Ateneo School of Government - Ateneo de Manila University ( email )

Pacifico Ortiz Hall, Fr. Arrupe Road
Social Development Complex, Loyola Heights
Quezon City, Manila 1108
Philippines

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