Through Luz Wendy T Noble, News reporter
The Philippine central bank may need to reconsider its accommodative monetary policy ahead of schedule as commodity price rises have surged inflation concerned, the InternaThis is reported by the Monetary Fund (IMF).
“While there is still some policy room to absorb the price increases, the latest figures show that inflAs the migration is in the middle of the BSP (Bangko Sentral ng Pilipinas) target range, greater vigilance from monetary authorities will be required and accommodative monetary policy may need to be adjusted earlier than expected,” said Ragnar Gudmundsson, representative of the IMF in the Philippines. an e-mail.
A poll conducted by Business Last week, 15 out of 17 analysts showed the Monetary Board will maintain its historically low key rate today (March 24), in line with signals from the central bank that it will remain patient in supporting growth.
BSP Governor Benjamin E. Diokno has previously said the central bank would remain patient in supporting the economy and wait until the second half of the year to assess the need for a rate hike.
The Consumer Price Index (CPI) rose 3% for the second month in a row in February, which is within the BSP’s target of 2-4%. However, the BSP has warned that inflation could exceed its target range in the second quarter if oil prices continue to rise.
Global crude oil prices have been extremely volatile in recent weeks following the Russian invasion of Ukraine. This was due to supply concerns as Russia is the world’s second largest oil exporter.
Commodity prices have also risen worldwide. Wheat is an important export product for both Russia and Ukraine.
Mr. Gudmundsson noted that oil and gas, energy and transportation, and wheat have a combined weight of approximately 18% in the country’s CPI.
“The current surge in energy and commodity prices has exacerbated inflationary pressures already caused by supply chain disruptions and the recovery from the 2019 coronavirus disease (COVID-19) pandemic,” he said.
“You should therefore expect some pass-through from these higher prices to emerge”flin the coming months,” he added.
Mr Gudmundsson said the IMF estimates that the pass-through of world oil prices in emerging markets to prices paid by consumers is 25%.
“The war willffect the cost of living, especially for the poorest households, disproportionatelyffdue to the rise in energy prices,” he says.
Since the beginning of 2022, the pump prices of petrol, diesel and kerosene have increased by P14.90, P19.20 and P16.35 per liter respectively.
Meanwhile, Mr Gudmundsson noted that the country’s strong external position serves as a safety net against market volatility and the weakening of the peso due to the war in Ukraine.
“While market uncertainty could lead to a rise in government bond yields and increase pressure on the currency, it is important to note that the Philippines benefits from its flexible exchange rate and strong position in foreign exchange reserves,” he said.
Last week, the IMF said in a blog titled “How War in Ukraine Reverberates in Regions of the World” that Asia-Pacificto bec economies will experience only limited spillovers effect from the war because of the distant economic ties. However, it warned that slower growth in Europe and the global economy could hit oil importers in Southeast Asia.
“The pressure on food prices in Asia should be alleviated by local production and more reliance on rice than on wheat. Expensive food and energy imports will drive consumer prices up, although subsidies and price caps for fuel, food and fertilizers may mitigate the immediate impact, but with to becost of scale,” it said.
The IMF expects the Philippine economy to grow by 6.3% this year, which is below the government’s target of 7-9%. In January, it said the impact of the Omicron variant will be limited to the to befirst quarter of the year.
The economy grew by 5.6% last year, after a record contraction of 9.6% in 2020.