‘Like a ricocheting bullet’: PH braces for impact of Putin’s war on Ukraine


This photo taken on January 29, 2019 shows a general view of the Makati financial district skyline in Manila. (Photo by Ted ALJIBE / AFP)

MANILA, Philippines — The Philippines is bracing for the indirect and contagious effects of economic sanctions against Russia following Vladimir Putin’s invasion of Ukraine, according to the President’s Chief Economic Officer Rodrigo Duterte.

Finance Secretary Carlos Dominguez III told Bloomberg last Wednesday (March 16) that given the Philippines’ limited trade with Russia and Ukraine, financial and trade sanctions imposed on Russia by Western countries are not would have no direct impact on the Philippine economy.

“But we are very concerned about the effects on the global economy as a whole,” Dominguez said. “We fear there will be an effect on the strength of the economies of Western Europe and the United States, which are our trading partners.”

Dominguez said he fears global trade disruptions affecting logistics and the ease of doing business across borders, which began due to the COVID-19 pandemic, could be prolonged by the Russian-Ukrainian war. . “It’s like a bullet ricocheting – sometimes we get hit,” he said.

Philippine finance chief says domestic inflation is likely to be ‘a bit higher’ due to high global commodity and food prices ‘but we are prepared to deal with it’ with cash grants to vulnerable sectors as well as lowering tariffs on certain food imports despite rejecting proposals to suspend oil taxes.

“We are also looking at different monetary tools to deal with this crisis,” Dominguez said.

Dominguez said the fact that rice prices have been stable since liberalized trade was implemented three years ago allowing more imports has helped. “The price of rice is no longer an engine of inflation.”

In a blog post, the Washington-based International Monetary Fund (IMF) noted that “in Southeast Asia, wheat is only 7% compared to 42% for rice, whose price increases have now been relatively contained”. The IMF has warned that soaring food prices – like wheat – produced in countries at war will hurt poor countries the most.

“Food price pressures in Asia are expected to be mitigated by local production and a greater reliance on rice than wheat,” the IMF said in another blog post.

“Costly imports of food and energy will raise consumer prices, although subsidies and price caps on fuel, food and fertilizers may mitigate the immediate impact – but with fiscal costs,” said he declared.

The Philippines, for example, allocates at least 39.2 billion pesos in the form of cash distributions to poor households, fuel subsidies to public transport drivers, as well as fuel rebates to agricultural producers.

Putin’s campaign to win over other nations, starting with Ukraine, has also delayed the Philippines’ plan to borrow funds through “green” bonds for its climate mitigation programs and projects, as rich nations have yet to meet their funding commitments to support developing countries in their clean energy. transition under the Paris Agreement.

“We are assessing the market at the moment – as you know the market is very volatile. We are looking very, very closely at the issuance of our green bonds, which is in preparation. this subject, but we will be ready as soon as market conditions improve or stabilize,” said Dominguez.

Before the war, Dominguez told foreign businessmen that the Philippines was expected to issue at least $500 million in green bonds in the coming weeks.

Before the Duterte administration left office in mid-2022, Dominguez said the Philippines would likely raise funds again through yen-denominated samurai bonds, although the government relied more on the domestic debt market, which was the source of about three-quarters of annual sovereign borrowing.

“We really developed our local capital markets with the support of monetary policies to reduce the reserve requirements of our banks here,” Dominguez said.

The Philippines, he said, “is more dependent on our domestic bond market.”

The Bureau of the Treasury (BTr), however, totally rejected 100 billion pesos of scheduled borrowing two weeks after Putin escalated his assault into a full-scale war as bid rates soared.

This week, the BTr partially allotted more than 22 billion pesos of the 50 billion pesos it was supposed to borrow in its auction, as domestic creditors were still looking for high yields.



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