Inflation rate in April likely accelerated to as high as 4.7 percent from 4.3 percent in March using the 2012 base index on higher oil prices and power rates, the Bangko Sentral ng Pilipinas said Monday.
The Bangko Sentral’s Department of Economic Research said April inflation likely settled within the 3.9-percent to 4.7-percent range.
“This represents a slight upward revision. Geopolitical tensions in the Middle East caused a sharp increase in international oil prices spilling over to higher domestic petroleum prices for the month,” the Bangko Sentral said.
“In addition, higher electricity rates in Meralco-serviced areas as well as higher rice prices due to supply conditions could contribute to additional price pressures,” it said.
The regulator said it would continue to monitor closely evolving inflation dynamics over the policy horizon against any signs of incipient price pressures that could warrant a policy response.
Japanese global financial firm Nomura earlier said the increasing oil prices could widen the Philippines trade deficit because the country was importing most of its oil requirements.
Nomura said in a report the Philippines was one of the countries that were “clear-cut losers” as higher oil prices would impact the economy.
“Importing almost all of its oil needs, we estimate a $10/bbl increase in oil prices could increase the trade deficit by 0.5 percent of GDP, which would significantly pressure a current account deficit that already reached 0.8 percent of GDP in 2017 due to strong import demand,” Nomura said.
“We assess the potential impact of sustained, higher oil prices on 26 emerging market economies. The clear-cut winners include Saudi Arabia, Nigeria, Colombia and Malaysia, and the clear-cut losers are Turkey, India and the Philippines,” Nomura said.
The trade-in-goods deficit went up by 15.9 percent in 2017 to $41.5 billion as the growth in imports of goods of 14.2 percent outpaced that of exports of goods at 12.8 percent.
Nomura said that aside from widening the trade deficit, higher oil prices could also trigger an acceleration in inflation.
“CPI inflation”•which rose to 4.3 percent year-on-year under the new 2012 base year in March”•could rise by 0.2 pp with a relatively quick pass-through given no fiscal subsidies,” Nomura said.
It said this would push CPI inflation above the 2 percent to 4 percent inflation target of Bangko Sentral, “further supporting our call for 75bp of policy rate hikes this year starting in May, and there are risks of more rate hikes should oil price increases persist and second-round effects rise more quickly given the strength of domestic demand.”
