Rising energy and commodity prices threaten PHL’s growth


A worker takes a sample of the petroleum product before filling up a gas station in Quezon City on March 28. — PHILIPPINE STAR/ MICHAEL VARCAS

THE PHILIPPINES is one of the Asia-Pacific countries that would be hardest hit by soaring energy and commodity prices due to the Russian-Ukrainian war, S&P Global Ratings said.

“Rising energy and commodity prices, exacerbated by the Russian-Ukrainian conflict, are increasing regional inflationary pressures. The hit would be felt the hardest by the largest net energy importers (relative to gross domestic product) of India, the Philippines, Korea, Taiwan and Thailand,” Eunice Tan and Terry said. Chan, S&P Global Ratings analysts, in a note.

Earlier this month, S&P cut its gross domestic product (GDP) growth estimate for the Philippines this year to 6.5% as it expects a larger current account deficit and higher inflation. high.

Last week, the central bank raised its inflation forecast for 2022 to 4.3%. This figure is already above its target range of 2-4%, as it recognized the impact of rising oil and commodity prices.

Meanwhile, a report by Nomura Global Markets Research analysts Rob Subbaraman and Si Ying Toh showed that the Philippines was ranked among the group of commodity-dependent emerging markets that have “relatively sound fundamentals and will benefit from a decline in commodity prices. Also included are China, South Korea, India and Thailand.

“The Russian-Ukrainian war has resulted in an extraordinary spike in commodity prices that is expected to drive a wedge between emerging market losers (large net commodity importers) and emerging market winners (large net commodity importers)” , Nomura said.

“Most emerging countries are large net importers of energy and some – South Korea, the Czech Republic, China, Romania, Egypt and the Philippines – are also large net importers of food, which makes them doubly exposed,” he added.

However, Nomura said the Philippines is among the resilient emerging markets due to its limited trade exposure to Russia and Ukraine.

However, analysts have warned that emerging markets are more prone to the impact of rising commodity prices, as their baskets of consumer price indices have larger weights for food prices compared to their counterparts in developing economies. In this scenario, Nomura warned that more emerging economies could then experience double-digit inflation already seen in Turkey.

“Even in Asia, where inflation has been relatively low, prices are expected to pick up,” he said.

Nomura also noted that the impact of the war in Eastern Europe comes at a time when some emerging economies are still far from a full economic rebound from the pandemic. He noted that emerging markets that have the “weakest recoveries” include the Philippines, Peru, the Czech Republic, Thailand, Indonesia and Romania.

“If they have weak fundamentals, high exposure to Russia and suffer from high commodity prices, then their economies may become more fragile (e.g. Czech Republic, Romania and Philippines),” he said. -he declares.

Nomura expects the Philippine economy to grow by 6.3% this year. — LWT Noble

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