MANILA, Philippines - Inflation could be higher than currently expected this year and next, although still within target ranges, if there were changes to some subsidies and transport costs, Bangko Sentral ng Pilipinas (BSP) deputy governor Diwa Guinigundo said on Friday.

If possible cuts to subsidies on items such as rice as well as increases in public transport fares and toll charges took place, inflation in 2010 would be forecast at 4.37% and in 2011 it would be forecast at 4.24%, he said.

During its last policy meeting, the central bank cut its inflation projections for this year and next year to 4% from 4.7%, and 3% from 3.6%, respectively.

Both are within the official target ranges of 3.5% to 5.5% for 2010, and 3% to 5% percent for 2011.

The BSP noted that inflation was expected to remain favorable because of stabilizing food and energy prices. But it did not take into consideration increasing transport costs.

By August 16, the public will finally start paying the value-added tax on the use of major tollways as the government is hard-pressed on raising additional revenues to fund social services and trim the country's budget deficit.

Along with the VAT on toll, a 250% increase in toll fees at the South Luzon Expressway will be implemented to recover rehabilitation costs.

An increase in fares for both the Light Rail Transit and Metro Rail Transit is also being proposed. With a report from Reuters