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October 07, 2022

HSBC sees sharp rise in inflation after jeepney fare hike

The Hongkong and Shanghai Banking Corp. (HSBC) headed by bankero Sandeep Uppal sees a sharp rise in inflation after the Land Transportation Franchising and Regulatory Board (LTFRB) raised by minimum fare hike for public utility jeepneys by P1 to P10 in the first four kilometers.

HSBC economist for ASEAN said headline inflation may increase by 0.2 to 0.3 percentage points due to the fare hike in the National Capital Region (NCR) and nearby provinces and by 0.4 percentage points if other regions follow suit.

“Indeed, a big and untimely uptick in the high inflationary environment we have today,” Dacanay said.

The price of diesel in the Philippines has already surged by 58 percent to P78 per liter from P49 per liter early this year.

“The hike is a clear indication of second-round effects. With the ubiquity of jeepneys, the hike may raise inflationary expectations further and lead to more types of second-round effects once other parts of the economy begin internalizing the cost,” Dacanay said.

Dacanay said that it is in the interest of the government to protect the transport sector that is badly hit by the rise in global oil prices.

“With the risk of jeepney operators stopping their operations due to high costs, inflation is better than no transportation. There are already fuel subsidies in place of P6,500 per driver to help ease the burden,” Dacanay added.

Dacanay explained that policymakers and lobbyists are looking into other policies such as raising fares or suspending fuel excise taxes, with fuel prices increasing at a high rate.

“In our view, a fare hike is a more sustainable and fairer solution than suspending fuel taxes,” the economist said.

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