BSP: PH’s distance, limited link to Ukraine, Russia may 'insulate' economy from war

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Metro Manila (CNN Philippines, March 15) — The Philippine economy may be shielded from the Russia-Ukraine conflict given factors such as its limited connection to both countries, the Bangko Sentral ng Pilipinas said.

“[T]he Philippines’ geographic distance and limited economic link to both Russia and Ukraine, as well as its strong macroeconomic fundamentals, could insulate the domestic economy during the current risk-off episode,” tweeted BSP Governor Benjamin Diokno on Monday.

Diokno noted that the country's exports to Russia in 2021 were negligible at $120 million or 0.2% of total exports. Ukraine had a smaller share at $5 million.

“Other economic linkages through investments, remittances, and tourism were also limited,” added the central bank chief.

The BSP official likewise emphasized how inflation levels when the war between both countries broke out matter. For instance, Philippine inflation has averaged at 3% so far – well within the 2-4% target range for 2022.

“The highest inflation is Argentina’s 50.7%. There is greater sense of urgency to act for countries with high inflation,” explained Diokno.

The BSP still noted that inflation could rise given the uptick in oil prices.

“Doing sensitivity analysis, we arrived at the following forecasts: if average world price of oil is US$95 per barrel, domestic inflation will be 4.0%; if US$120 per barrel, it will be 4.4 %; and if US$140 per barrel, it will be 4.7 percent,” said Diokno.

Brent crude is at $101.34 per barrel, based on latest data reported by CNN Business.

A United Kingdom-based think tank earlier said that while it projects quicker inflation for the Philippines at 3.5%, it’s still milder than the 3.9% logged in 2021.