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Sep 16, 2018 @ 18:25

Find out why DOF considers higher inflation, weaker peso a boon to the budget


No wonder the Department of Finance is not breaking a sweat over surging inflation and plummeting peso.

Based on its macroeconomic parameters, the DOF tagged both inflation and weak peos as a positive contributor to government revenues along with higher economic growth and higher imports.

The DOF said every one percentage point increase in inflation would generate P20.7 billion in additional revenues for the government.

This is roughly equal to the P21.4 billion revenues generated for every percentage point hike in the Gross Domestic Product.

The DOF also expected to raise P7.5 billion every time the local currency loses one peso in value to the United States dollar. This is nearly double the P4.2 billion revenue hike the DOF expected for every one percentage point increase in imports.

Of its seven budget parameters, it cited three factors that would have a negative impact on the budget – Treasury bills, bonds, and the London Interbank Offered Rate.

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