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Philippines: Inflation may surge to 7% as global crude prices rise
MANILA, Philippines — The government needs to open up public transportation to reduce the cost of mobility, especially in Metro Manila, as economists yesterday warned inflation may shoot up to seven percent within the year.
Former socioeconomic planning secretary Ernesto Pernia said the Philippines may experience the same inflation rates it endured in 2018 if crude prices in the international market balloon as projected by global think tanks.
He said the Philippines, as a net importer of oil, bears the brunt of raising its fuel rates when the international market adjusts its barrel prices.
“If the price of oil spikes sharply, then that’s possible. Part of the increase in the rate of inflation has always been due to the rise in fuel costs. If world market prices go up, it’s something really high, that is a possibility. It is speculative, but it is a possibility,” Pernia told The STAR.
He said authorities should expand the capacity and availability of public transport to give workers options in commuting to their workplaces. At present, the government maintains a cap on the number of public transport units allowed to ply the roads, and this forces workers to spend more for mobility by taking a cab or hiring a shuttle.
“The different modes of transportation need to be opened up so there will be enough transport for the workers and the public in general,” Pernia said.
UK-based Pantheon Macroeconomics also expects inflation in the Philippines to peak at above six percent by the third quarter as it anticipates utility and transport costs to shoot up during the period on oil price pressures.
“Looking ahead, we continue to believe that the headline rate is unlikely to peak until the third quarter, though softer-than-expected readings over the past two months implies probable peak of just over six percent, down from our previous forecast of around seven percent,” Pantheon said.
In its outlook, London-based Capital Economics said Brent crude oil now stands at $69 per barrel, from $64 in the first quarter. It anticipates the price to breach $70 a barrel within the second quarter and soar to as high as $75 by the third quarter.
The think tank said the resumption of travel activities in Asia and Europe would increase the demand for oil in the second half. However, prices may surge by the third quarter, as supply remains constrained in the short term.
“More importantly, though, the lagged feed-through of global oil prices to utility costs means that this upward push will intensify and is unlikely to stop until August, at the earliest,” Pantheon said.
“Transport inflation likely is as fast as it will get, but expect it to remain very sticky at its current elevated rate,” it said.
Maria Ella Oplas, economics professor at the De La Salle University, told The STAR inflation may range between 4.7 percent and five percent in May, as the loosening of quarantine restrictions in Metro Manila and its surrounding provinces would boost economic activity.
She said inflation may peak at five percent, which would force government to intervene in the pricing of basic goods.
Source: https://www.philstar.com/business/2021/05/07/2096344/inflation-may-surge-7-global-crude-prices-rise