(Bloomberg) -- Sign up for the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.
The impact of Russia's invasion of Ukraine on the Philippines will be mainly through higher oil prices, the Southeast Asian nation's central bank Governor Benjamin Diokno said.
A “worst-case scenario” of oil prices hitting $120-$140 per barrel may result in inflation averaging between 4.4%-4.7% this year, he said in written remarks sent to reporters Sunday night. The central bank had earlier expected consumer prices this year to settle within in its 2%-4% target.
“For the Philippines, the impact will be indirectly through the war's impact on the global economy and on prices of commodities, such as oil and energy and food,” Diokno said.
Inflation in the Philippines has been one of the most sensitive to crude price swings among major Asian economies, analysts at Citigroup Inc. Johanna Chua and Yuanliu Hu wrote in a note last week, as higher oil directly pass through to both fuel and electricity.
The peso on Monday dropped to its weakest against the dollar since September 2019 on after Brent oil in London soared to as high as $139 a barrel after U.S. officials said they were discussing an embargo on Russian crude.
While Diokno didn't specify the oil grade used in the central bank's outlook, the central bank typically uses Dubai crude, which usually trades at a discount to Brent.
In his Sunday remarks, Diokno said the central bank sees “muted” impact of the war on the peso, with the currency's move being in line with regional peers.
The central bank “has various liquidity-enhancing tools that can be deployed in case the domestic liquidity situation becomes unexpectedly tight or disorderly,” he said, adding that these include those used in previous crises.
©2022 Bloomberg L.P.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
