Press Releases
TRAIN LAW: monetary policy implications and inflation projections

Bangko Sentral ng Pilipinas (BSP) representative Deputy Director Dennis M. Bautista of Economic Research Department reiterated its main mandate during the Board’s discussion last February 13, 2018 on the possible effects of the Tax Reform for Acceleration and Inclusion (TRAIN) Law which is to maintain stability in prices that is conducive to a balanced and sustainable growth of the economy. More so, it shall promote and maintain monetary stability and convertibility of peso in the country.

With the implementation of the Train Law, BSP puts an eye on the price stability taking into consideration the following factors: consumption, savings, investments and even the production aspect among others. Such will facilitate the creation of more job opportunities and facilitate the increase provision for social services such as housing, education and health.

As to inflation projections, it has been routinary for BSP to have public announcement of its inflation target that will promote transparency in monetary policy. BSP forecasted for 2% - 4% from 2015 to 2020. On the macroeconomic impact of the law, BSP predicted that the Train may represent an upside risk to inflation where prices could be attributed from higher consumption taxes and increased from higher infrastructure spending and higher disposable income due to lower personal income. The estimated inflationary impact of Train shows that inflation could increase by up to one percentage point in 2018 and by less than half percentage point in 2019. Finally, BSP reiterated that there will be potential expansion of the economy’s productive capacity which is expected to temper price pressures in the medium term. END / Kim Lagcao / IMSD-LCO-2018-02 / PRF18-19

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