Will the Philippines’ Economy Be Safe From the War?
Amid rising prices, will geographic distance and limited economic link to Russia and Ukraine be enough to protect the country’s economy?
The ongoing war between Russia and Ukraine has affected many countries on a worldwide scale, with major players exiting Russia, sanctions being imposed, and the price of commodities like oil and gold reaching an all-time high.
And while some of the repercussions are being felt in the Philippines in the form of rising fuel prices, people are left wondering: what will happen to our economy?
Geographic Distance and Limited Connection
Thankfully, due to limited connections to both countries, the Bangko Sentral ng Pilipinas (BSP) said that the Philippine economy may be shielded from the Russia-Ukraine conflict.
According to BSP Governor Benjamin Diokno in a Twitter post last Monday, “[T]he Philippines’ geographic distance and limited economic link to both Russia and Ukraine, as well as its strong macroeconomic fundamentals, could insulate the domestic economy during the current risk-off episode.”
In fact, Diokno noted that the country’s exports to Russia in 2021 only took up 0.2% of total exports at a negligible amount of $120 million, while Ukraine had an even smaller share at $5 million. “Other economic linkages through investments, remittances, and tourism were also limited,” Diokno added.
Risks in Inflation
Moreover, the BSP official emphasized the importance of checking inflation levels amid the ongoing war. Philippine inflation, for example, has averaged 3% so far—well within the 2 to 4% target range for 2022. “The highest inflation is Argentina’s 50.7%. There is [a] greater sense of urgency to act for countries with high inflation,” he explained.
While there seem to be no drastic effects on the country’s economy, the BSP still cautions against inflation, which could rise given the surging oil prices. “Doing sensitivity analysis, we arrived at the following forecasts: if [the] average world price of oil is US$95 per barrel, domestic inflation will be 4.0%,” said Diokno. “[But] if at US$120 per barrel, it will be 4.4 %; and if US$140 per barrel, it will be 4.7 percent.”
Based on the latest data reported by CNN Business, Brent crude is at $101.34 per barrel.
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