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Philippines: Rising oil prices may push up inflation
MANILA, Philippines — As global oil prices rise, expect a spike in Philippine inflation this month, an international think tank said.
In its latest weekly brief, London-based Capital Economics said the increase in energy prices will put upward pressure on inflation across the region.
Senior Asia economist Gareth Leather said the impact, however, may be short-lived and unlikely to worry policymakers.
“In some places inflation is already higher than central banks would like. September inflation data for Korea, the Philippines, Pakistan and Taiwan all showed inflation above target,” he said.
“And headline rates are likely to rise further in October due to the jump in energy prices, with the price of coal and gas now at record highs, and Brent crude at its highest level since 2018,” he said.
Global oil prices are on the rise, with Brent crude hitting over $80 per barrel. The Philippines greatly depends on the international market for its oil supply.
Last month, inflation unexpectedly slowed to 4.8 percent, but economists warned this was likely just a blip and would not be sustained in the coming months.
Average inflation for the year now stands at 4.5 percent, just above the central bank’s 4.4 percent target for 2021.
Leather said energy prices should start to ease soon, as supply and demand adjust.
“But even if prices hold steady at their current elevated levels, energy price inflation would still fall rapidly from December as last year’s low base slipped out of the annual comparison,” he said.
Meanwhile, Capital Economics maintained that the shortage of semiconductors has yet to put upward pressure on the prices of vehicles and electronics in the region, unlike in other parts of the world.
Leather said even if the prices of these goods start to increase, the relatively low weight in most countries’ inflation baskets means the impact on overall inflation would be small.
Taking all of these into consideration, he noted that most central banks in the region would not be in a hurry to start tightening monetary policy.
Source: https://www.philstar.com/business/2021/10/11/2133186/rising-oil-prices-may-push-inflation