PHILIPPINE conglomerates warned the ongoing Middle East conflict could slow economic growth as higher costs, energy risks and global uncertainty weigh on business activities.
SM Investments Corp. chairman Teresita Sy-Coson and Ayala Corp. chairman Jaime Augusto Zobel de Ayala said businesses are preparing for a slower growth scenario as external factors are making people nervous and cautious about spending.
This as President Ferdinand Marcos Jr. met with Bangko Sentral ng Pilipinas Governor Eli Remolona Jr. late Tuesday afternoon to discuss the Monetary Board’s policy considerations, particularly on any decision to reduce interest rates.
Finance Secretary Frederick Go said a short-lived conflict in the Middle East would likely shave less than 0.1 percent off the country’s gross domestic product (GDP) growth, but if the hostilities drag on for more than six months, the negative impact on the economy would become more pronounced.
“If it persists for more than six months, it will have a more pronounced effect on our GDP growth,” Go said, adding that the BCSP may also increase the benchmark interest rates if oil prices continue to rise.
Malacañang on Tuesday also urged the public to avoid spreading fear, assuring that President Ferdinand Marcos Jr. and the government remain in control amid ongoing challenges.
“While we are all in this situation, let us refrain from doing activities like fear mongering. This adds burden to the people even as the President and the government are in control of the situation,” Palace Press Officer Claire Castro said.
The BSP’s Monetary Board is set to meet on April 23. A rate hike would reverse the bank’s monetary easing cycle, which reduced borrowing costs by 25 basis points in February to support economic recovery.
“If the price of oil continues to persist at elevated levels, it is most likely that the Monetary Board will consider tightening in the next meeting,” said Go, a member of the BSP’s Monetary Board.
Remolona earlier hinted that oil at the $100 level could force a tightening of policy as inflation threatens to breach the bank’s 2 percent to 4 percent target range.
Inflation picked up to 2.4 percent in February, marking the fastest pace in over a year. The country faces further price pressure from a substantial increase in fuel costs this week and a projected 16 percent rise in power costs for April.
Sy-Coson said the current crisis has created more risks for companies in terms of higher operating costs, lower margins and slowing consumer spending.
“We are looking into maybe 5-6 percent growth. But with all these external problems, I don’t think we can mark that 5-6 percent growth,” Sy-Coson said in a forum held in Taguig City yesterday. “But I would be happy if our group can make some growth, even at 2-3 percent. That will sustain us for next year.”
Sy-Coson assured the public SMIC will not slowdown on capital spending despite current market conditions.
“Our capital spending will still be there as planned. But we were hoping that this will be a temporary thing so that we can prepare for better days,” she said.
Zobel de Ayala said that if the current geopolitical tension goes on for more than two months, companies will start reassigning their long-term plans.
“I think what is important is to ride out the difficult times safely and we will have a chance to rebuild again,” Zobel said.
As this developed, the Senate is set to review the country’s economic outlook and policy readiness amid rising risks from the escalating Middle East conflict, Senator Sherwin Gatchalian said.
Gatchalian, chair of the Senate Committee on Finance, is pushing for an inquiry to assess whether the Philippines’ budget framework remains realistic under volatile global conditions.
“It is important to determine whether current market conditions remain aligned with the national budget and to identify whether adjustments to fiscal policy are needed to ensure it continues to respond to the needs of our people,” he said.
In a separate statement, Senator Francis Pangilinan warned that rising fuel costs threaten food security and the livelihoods of farmers and fisherfolk, who rely heavily on fuel for production and transport.
