Gatchalian: How come the economic managers failed to forecast spike in inflation rate?

Senator Sherwin Gatchalian is exasperated by the supposed failure of Duterte’s economic managers to fully inform the Senate about the impact of the Tax Reform for Acceleration and Inclusion (TRAIN) law on inflation.

Gatchalian, chairman of the Senate committee on economic affairs, asked why the Department of Finance, Bangko Sentral ng Pilipinas, and National Economic Development Authority were not able to forecast that the inflation rate would breach the 2-4 percent target range.

“How come now we see a breach of 4 percent when all agencies say it will be below 4 percent,” he said during the Senate hearing on the inflationary effects of TRAIN.

Finance Undersecretary Gil Beltran told the committee that inflation was triggered by prices of tobacco, as well as oil in global markets.

“The main impact was triggered by higher global prices of oil, from $50 per barrel last year to $70 per barrel this year. We did not expect that tobacco prices would rise to 40 percent, we did not expect the better implementation of sin tax would cause inflation on tobacco prices,” he said.

Bangko Sentral ng Pilipinas Deputy Governor Diwa Gunigundo said global oil prices rose because members and non-members of the Organization of Petroleum Exporting Countries (OPEC) decided to cut their oil output.

The artificial shortage of rice, due to the supply lack of the National Food Authority, caused rice prices to increase and contributed to inflation as well,  the central bank official noted.

‘Bakit hindi nakita ito?’

Gatchalian noted that senators mentioned these factors during the Senate hearings on the proposed tax reform law.

“These are things that have been forecasted as early as January of 2017, but in your presentation these things were not included,” the senator said.

“Bakit hindi natin nakita ito? How come the Senate was not given full information as to the externalities that could affect inflation?”

“We expected from you. You have a lot of knowledge and staff. How come the Senate was not given this full information?” he said.

By including such inputs or inflation scenarios during the hearing, the senate could have changed its position on the proposed TRAIN law, the senator noted.

“I’m just hoping the economic cluster did not underestimate the forecast of inflation just to push for TRAIN. That is a turning point in the decision of the Senate,” he said.

Senator Paolo Benigno Aquino IV asked what the other assumptions were that the economic managers did not take into consideration.

“Baka ‘yung assumptions natin meron talagang flaw. Ano ‘yung assumptions na mali tayo kaya ganito kataas ang inflation?” he said.

Beltran reiterated they did not factor in the prices of global oil and rice and the as well was the inflationary impact of the sin tax law. —VDS, GMA News