Philippines among at risk from rising oil prices – Nomura

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MANILA, Philippines — The rising global oil prices would continue to hurt the economies of the Philippines and other large net oil importers including Turkey and India, according to a report by Nomura Securities.

The report said the Philippines’ trade deficit may increase by 0.5 percent of gross domestic product for every $10 per barrel rise in oil prices.

The widening trade gap, Nomura said, would significantly pressure a current account deficit that already reached 0.8 percent of GDP in 2017 due to strong import demand.

Furthermore, it added inflation would rise by 0.2 percent with a relatively quick pass-through given no fiscal subsidies for every $10 per barrel increase in oil prices.

The consumer price index (CPI) kicked up to 4.3 percent in March from 3.8 percent in February due to rising oil prices and the initial impact of the implementation of Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Law.

Inflation averaged 3.8 percent in the first three months and the Bangko Sentral ng Pilipinas (BSP) expects inflation to range between 3.9 and 4.7 percent in April due to higher rice prices, a sharp increase in oil prices, and more expensive electricity rates.

“This would push CPI inflation even higher above the two to four percent inflation target of BSP,” Nomura said.

Based on the latest assessment of the BSP last March 22, inflation may fall within the target of two to four percent this year and next year.

The BSP has been reluctant in raising interest rates amid rising inflationary pressures as inflation expectation is well within the target over the near term.

The Monetary Board is set to hold its next rate-setting meeting on May 10. It last raised interest rates in September 2014, but has kept a low interest rate regime over the past three years to support the growing economy.

Nomura said the central bank is likely to raise interest rates by 75 basis points to 3.75 percent this year starting next week.

“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,” it said.

The BSP sees Dubai crude oil rising to a range of $55 to $70 per barrel this year before decreasing to a range of $50 to $65 per barrel next year.




Agcaoili, L. (May 3, 2018). Philippines among at risk from rising oil prices – Nomura. The Philippine Star. Retrieved from


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