IHS Markit Asia Pacific Chief Economist Rajiv Biswas said Asian markets, including the Philippines, should remain vigilant amid the surging crude oil prices due to the escalation of geopolitical tensions in the Middle East.
In an e-mail, Biswas said a large number of Asia Pacific countries are vulnerable to the rapid increment in world oil prices, particularly industrial nations such as China, Japan, South Korea, India, Thailand, and Singapore. These countries are heavily reliant on imported oil from Middle East.
If world oil prices rise sharply due to further escalation in the Middle East crisis, many Asian nations are also vulnerable to the impact of higher oil import prices on retail inflation, Biswas said.
(T)his could hit the Philippines economy through higher inflation as well as rising oil import costs, which could further widen the current account deficit, he said.
Biswas said if world oil prices will rise sharply resulting in higher consumer prices, he forecasted that the Bangko Sentral ng Pilipinas (BSP) would likely postpone its plans to ease monetary policy until global crude prices stabilize.
Sectors in the Philippines that would be heavily exposed to any significant rise in world oil prices include transportation-related industry such as aviation, road haulage, shipping, and logistics, he said.
Jet fuel accounts for an estimated 25 percent of total operating costs for the airline industry, he added.
Biswas said the rising crude oil prices would also hike petrochemical costs, affecting prices of downstream chemical intermediates and plastics.
He added higher cost of petrol and diesel would likely impact the agriculture sector as it is being used in tractors and other agricultural machinery as well as irrigation pumps.
Source: Philippines News Agency