Peso slumps to P52 vs dollar as oil prices surge

The Philippine peso weakened past P52 to a dollar, its lowest point since 2019, due to escalating global oil prices amid the Russia-Ukraine conflict.

ING Bank Manila economist Nicholas Mapa indicated that elevated oil prices and a depreciating peso could result in inflation rates matching or surpassing the 6.7% seen in 2018.

BSP Governor Benjamin Diokno stated that inflation could reach 4.7% if oil prices range between $120 to $140 per barrel this year.

Mapa's analysis suggests Diokno's forecast may only account for initial impacts, as sustained high oil prices and currency depreciation could push inflation above 5% by influencing inflation expectations.

Oil companies implemented significant price hikes on Monday, with diesel increasing by almost P6 per liter.

The House of Representatives is contemplating a suspension of certain petroleum product taxes to mitigate the price surge.

Despite inflation worries, the Bangko Sentral ng Pilipinas (BSP) has maintained its low-interest rate policy to aid economic recovery.

Governor Diokno also highlighted that the Russia-Ukraine war's primary impact on the Philippines is through higher oil prices, potentially pushing inflation beyond the 2%-4% target range for a second consecutive year if crude oil prices average above $95 per barrel in 2022 and 2023.