‘Ukraine war may run longer, impact PHL in more ways’

THE Philippines may need to buckle up as the Ukraine-Russia crisis could take longer than expected and more needs to be done to cushion the impact of the war on various countries, according to the Department of Finance (DOF).

In an interview on Bloomberg, Finance Secretary Carlos G. Dominguez III said this behind his call to multilateral development banks, namely, the Asian Development Bank (ADB) and the World Bank to craft “rescue packages” for economies that may be affected.

Dominguez said he will also be discussing with finance ministers from other countries in the Association of Southeast Asian Nations (Asean) on how economies in the region can better cooperate to mitigate the impact of the war in Eastern Europe, the first since the second World War.

“I’ve also started discussions with the ADB and the World Bank. I said they came together very well in the financing of the vaccines for the pandemic. I said, you know, this is another opportunity for you guys to work together and work together with the finance ministers involved. To see what kind of rescue packages that can be done particularly for the less developed countries,” Dominguez said.

Dominguez admitted that the war in Eastern Europe “weighed heavily” on the Philippines. The country has seen a rapid increase in oil prices as well as grain prices.

BusinessMirror earlier reported that initially, the war’s impact was observed only on oil prices. On the first few days of the invasion of Ukraine, international oil prices teased the $100 per barrel level. But it became clear that not only were oil prices going to go higher than $100 per barrel, but that inflation is bound to drive other commodities.

Ukraine and Russia are key suppliers of commodities such as wheat which the Philippines does not grow. Other commodities such as soybean and potash, one of the key ingredients in the manufacture of fertilizers, have also sent food prices soaring. (Story here: https://businessmirror.com.ph/2022/03/28/recovery-interrupted-as-covid-alerts-come-down-war-sends-prices-soaring/)

“We were well on our way to recovery, except now we have this Ukraine crisis, and that’s going to weigh a bit heavily on us. Although we’re not combatants, we’re affected by the increase in prices of fuel, of grain. And you know, this is among the things we discussed today at the World Bank and the G-20 meetings,” Dominguez said.

Apart from the war, a major stumbling block to the country’s recovery is its debts. Dominguez said the next administration must implement measures that would ensure that the Philippines outgrows its debts.

Dominguez said that while the country’s debts have terms of up to 40 years and were negotiated on “very favorable” terms, the Philippines can only outgrow its debts by posting a growth of at least 6 percent in the next five to six years.

Earlier, the Central Bank Governor remained confident the Philippine economy can still outgrow its debts.

In a plenary session at the Southeast Asia Development Symposium (SEADS), Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said the country’s current debt comprises 70 percent local and 30 percent foreign.

Diokno added that this year, the economy is expected to grow 7 to 9 percent, outpacing the growth of its debts. He said debt is expected to grow by around 2 percent this year.

Diokno said he expects the economy to perform well this year because the country “did not sit by” and wait for the pandemic to recede before it took action on much-needed reforms.

He cited the Retail Trade Liberalization Act, the Public Service Act, and the Foreign Investment Act which will significantly improve the country’s efforts in attracting foreign capital.

The Central Bank Governor also said the country’s reserves remain significant at 10 months worth of its imports. He said usually, the accepted doctrine is for the economy’s foreign reserves to be equivalent to three months of imports.

The Philippines’s exports, the earnings from sectors such as the Business Process Outsourcing (BPO), and OFW remittances help ensure that the country has ample reserves and growth drivers.

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