THE central bank expects a slight downward adjustment in its baseline inflation forecasts after utilities concessionaire Manila Water Co. Inc. announced that it would be slashing its basic water charges beginning this year.
“With the recent developments in the dispute case filed by Manila Water, particularly the Appeals Panel’s decision to approve a negative adjustment in Manila Water rates, we expect a very slight downward adjustment in the baseline inflation forecasts,” Diwa Guinigundo, deputy governor at the Monetary Stability Sector of the Bangko Sentral ng Pilipinas (BSP), said in a text message to reporters.
Guinigundo was referring to the ruling of international arbitration panel
International Chamber of Commerce (ICC), which said Manila Water cannot pass on its corporate income tax to consumers.
In the ruling, the ICC slashed Manila Water’s basic water charge by 11.05 percent or P2.77 per cubic meter. The rate reduction would be staggered for three years.
In compliance, Manila Water said it will initially reduce its basic charges by P1.66 per cubic meter this year.
The rates would be further reduced by 55 centavos per cubic meter in 2016 and another rate cut would be made in 2017.
“These updates on the dispute case filed by water service concessionaires, along with other developments, such as the quarterly changes in the foreign currency differential adjustment component of the water bill, will be taken into account in the forthcoming monetary policy meeting of the Monetary Board on May 14,” Guinigundo said.
At its meeting on March 26, the Monetary Board of the BSP decided to revise downward its inflation forecast for full-year 2015 to 2.2 percent from the previous forecast of 2.3 percent. For 2016, it retained the forecast at 2.5 percent.