Philippines: Inflation uptick feared anew amid Ukraine crisis

MANILA, Philippines — The Ukraine conflict may bring to a halt the downtrend in inflation as soaring oil prices in the global market would impact on local consumer prices, economists said.

ING Bank senior economist Nicholas Mapa said tensions between Russia and Ukraine would ratchet up pressure on inflation in the Philippines.

Rizal Commercial Banking Corp. chief economist Michael Ricafort also said the immediate impact would be on higher oil prices, considering that Russia is a major energy producer and supplier.

The price of the international benchmark Brent crude hit a seven-year high of almost $100 per barrel after Russia deployed troops to eastern Ukraine.

Inflation in the Philippines has been easing for five consecutive months, cooling to three percent in January.

Mapa now expects inflation to rise to 3.2 percent in February, further sapping the momentum in domestic consumption.

“The BSP (Bangko Sentral ng Pilipinas) is forecasting inflation at 3.7 percent for 2022, so I believe we could see inflation threaten the upper end of the BSP’s inflation target band as soon as the end of the second quarter,” Mapa said.

“A protracted period of elevated energy prices will definitely filter through to higher imported energy inflation, with the double whammy of fomenting Philippine peso depreciation pressure as firms need more dollars to cover pricier oil,” he said.

Ricafort, for his part, said inflation would remain at the three percent level due to the normalization of the inflation base.

But he warned that potential upticks could be expected if global oil prices breach $100 per barrel.

“That could partly slow down economic recovery prospects, especially if oil prices remain elevated. That could eat up on disposable income that would otherwise go to other consumer and business spending in the economy,” Ricafort said.

Mapa said the the BSP has identified $110 per barrel oil price as a potential tipping point for it to truly get frazzled by the current oil price spike.

“With Russia moving into rebel-controlled territory in Ukraine, we could be closer to that than previously expected,” Mapa said.