NEDA warns of fare hikes' high inflationary impact

October 20, 2018 News

MANILA ­- The National Economic and Development Authority [NEDA] warned of the potential inflationary impact of the recently approved fare hikes for public utility jeepneys and buses.

"Well, anything that increases the cost of service increases inflation," Socioeconomic Planning secretary and NEDA Director General Ernesto Pernia told reporters on the sidelines of the EU-­Philippines Business Summit in Paranaque City.

"The latest fare hikes may have second­-round inflationary effects in terms of additional upward adjustment on minimum wages and, in turn, on the prices of affected goods and services," Michael Ricafort,lead economist at Rizal Commercia l Banking Corp., told GMA News Online.

Ricafort noted the fare hike of PI is equivalent to an 11.1­percent increase, while the total fare hike of P2 is 25 percent. That is from the July 2018 fare to the P10 minimum jeepney fares that will take effect in early November 2018.

"Fare hikes could also add to inflation expectations in the economy, on top of the actual effect on inflation," he said.

"I think, we only approved 50 centavos ... Additional 50 centavos," Pernia said.

The P0.50 is a theoretical fare increase that forms part of a scenario conveyed by NEDA to the LTFRB regarding the inflationary impact of an increase in jeepney and bus fares.

The Land Transportation Franchising and Regulatory Board (LTFRB] recently released its decisions increasing the minimum jeepney fares to P10, as well as provisional fere adjustments for bus operations in both Metro Manila and the provinces.

The decisions will take effect 15 days after being published in a newspaper of  general or local circulation.

LTFRB Chairman Martin Delgra III said the board will publish the orders on Friday. 

NEDA is still in the dark as to how the fare increase will actually impact on inflation.

"We have to find out what the quantitative effect will be," Pernia said.

In a letter addressed to Delgra dated Oct. 2, NEDA undersecretary Rosemarie Edillion noted that the provisionary increase approved by the LTFRB will slightly lift the annual inflation rate by 0.076­ percentage point if implemented starting October.

"Its inflationary impact will, however, result in higher inflation in 2019 as it is estimated to contribute 0.221 ­percentage point to the country's annual inflation next year," Edillon said.

Filipinos have been reeling from soaring prices of basic goods and prime commodities as inflation hit a nine- ­year high of 6.7 percent.

"An alternative scenario of a lower fare adjustment for PUJs of just P0.50 on the minimum fare and only the PI basic fare increase will be implemented among PUBs (i.e. no increase in succeeding kilometer fare ofthe provincial buses) is estimated to result in additional 0.05 ­percentage point to inflation in 2018 and about 0.146­ percentage point in 2019," Edillion said.

"This alternative scenario can be made effective once the Pantawid Pasada has reached sufficient coverage, especially in the affected regions," she said.
The LTFRB allowed reporters take photos of Edillon's letter on Thursday.