The country may incur a record trade deficit of $50 billion this year as prices of global commodities led by oil, as well as natural gas, wheat, nickel, and copper soar as a result of the ongoing Russian invasion of Ukraine, an economist said Wednesday.
Rizal Commercial Banking Corp. chief economist Michael Ricafort told Manila Standard that the country’s import bill and trade deficit could widen further this year.
“The trade deficit estimate for 2022 would be wider—around-$43 billion to $45 billion, after $43.1 billion in 2021,” Ricafort said.
“However, in view of Russia’s invasion…, the country’s trade deficit could widen towards $50 billion in view of the sharp increase in global oil prices to new 13.5-year highs [since July 2008] as well [as] sharp increase in the prices of other imported global commodities such as wheat and flour, soybeans, corn, other grains, and metals, all of which would increase the country’s oil and commodity import bill in the coming months,” Ricafort said.
Furthermore, he said measures to further re-open the economy towards greater normalcy, especially in view of the proposal by the country’s economic team to ease the nationwide Alert Level to the lowest 1, as well as additional measures to further re-open the economy such as the resumption of in-person schooling, among others, would also lead to increased economic and importation activities.
However, Ricafort said the offsetting factors would include the country’s structural US dollar revenue inflows such as OFW remittances with at least $35 billion per year, business process outsourcing revenues with about $30 billion per year, and Philippine offshore gaming operations’ revenues, foreign tourism revenues, and foreign investment inflows.
Ricafort said these offsetting factors might be “enough to cover the country’s trade deficit that could reach close to $50 billion for 2022 from the $43.1-billion shortfall in 2021.
On Tuesday, reports said US President Joe Biden announced a ban on Russian oil and other energy imports in retaliation for Russia’s invasion of Ukraine. The announcement triggered a surge in crude prices. Although still below the peak of $139.13 per barrel on Monday, the main international oil contract, Brent, jumped 6.8 percent to $131.63.
Earlier, Finance Secretary Carlos Dominguez III said he remained optimistic the gross domestic product growth target of 7 to 9 percent this year could still be attainable as a comprehensive set of measures would ease the impact of the war on the domestic economy and the rate of inflation.