BSP backs fiscal interventions amid Russia-Ukraine conflict

The Bangko Sentral ng Pilipinas (BSP) on Thursday voiced its support for fiscal interventions aimed at addressing the inflation uptick, as it expects the ongoing conflict between Russia and Ukraine to drive up commodity prices even further.

The central bank said it backs fiscal interventions as it remains vigilant over the possible impact of the geopolitical tensions on the Philippine economy.

“We expect the ongoing crisis to continue to exert upward pressures on key international commodity prices, particularly oil and wheat,” it said in an emailed statement.

“Meanwhile, the ongoing conflict could also cloud prospects for global trade and investment, as uncertainty spills over into financial markets through higher volatility and weaker market confidence,” it added.

Local oil firms on Tuesday hiked prices of gasoline by P3.60 per liter, diesel by P5.85, and kerosene by P4.10, marking the 10th straight week of upward movement.

Latest data available from the Department of Energy (DOE) indicate that year-to-date adjustments stand at a total net increase of P8.75 per liter for gasoline, P10.85 per liter for diesel, and P9.55 per liter for kerosene as of February 22, 2022.

An industry source said that a big-time pump price hike could be implemented next week

The Canned Sardines Association of the Philippines (CSAP) has since pushed for a price hike, citing the higher operating costs due to the successive pump price increases.

“In this regard, the BSP supports the national government’s initiatives to implement appropriate fiscal interventions to cushion the economy from increased upside risks to inflation and to safeguard the momentum of economic recovery,” the BSP said.

“In particular, timely social protection measures could help alleviate the impact of rising crude oil prices on the transportation and agriculture sectors, while sustained efforts to ensure adequate domestic food supply could mitigate further supply-side pressures on inflation,” it added.

The government has set aside P2.5 billion for fuel subsidies for public utility drivers, while the Department of Transportation (DOTr) has its own service contracting scheme, which compensates drivers for delivering free services to commuters.

Moving forward, the BSP said it remains focused on preserving monetary policy support, as sustaining economic recovery “remains a priority.”

The central bank added it is ready to respond to potential second-round effects stemming from elevated inflationary pressures, which can disanchor inflation expectations.

Inflation clocked in at 3% in February, which was in the middle of the government's target range of 2% to 4%. This was also the same level posted in January. — VBL, GMA News