By Tracy Cabrera
THE Philippines is in dire straits as the Washington-based Institute of International Finance (IIF) warned the country’s economic managers that it stands to lose from skyrocketing global oil prices even as bigger import costs would slash billions from the stash of dollars in its current account.
In a report issued recently, IIF experts said that “higher energy prices will hurt several emerging and developing economies, among them the Philippines which remain heavily dependent on petroleum imports.”
Aside from the Philippines, the other ‘big losers’ to the high oil prices, the IIF noted, include Chile, Jordan, Morocco, Pakistan, Thailand, Turkey and Ukraine.
“In the case of the Philippines, IIF estimates showed that for every US$10 per barrel hike in oil prices, the country’s current account in 2022 would be reduced by US$1.76 billion if the current volume of hydrocarbon imports does not change, or a larger US$2.66 billion if it imports more next year,” the IIF report noted.
“These reductions in the current account would be equivalent to 0.41 percent of gross domestic product (GDP) for current importation levels and 0.62 percent of GDP if the Philippines import more oil in 2022,” it added as clarification.
The IIF estimated the Philippines’ net petroleum imports as a share of GDP to average over 3 percent during the 2018 to 2022 period.
The value of Philippine energy imports this year were projected to hit $12.5 billion and jump to US$15.2 billion next year as the economy recovers. Last year, energy imports fell to US$7.4 billion or almost half of the $13.3 billion in 2019 before the pandemic, as stringent lockdowns stopped mobility of people and nonessential goods, slashing oil demand amid the ensuing recession.
The IIF said that the Philippines’ current account as a share of GDP swung to a surplus of 3.1 percent worth US$11 billion last year as the country saved dollars due to the slump in imports, not only of energy but also consumer goods and capital equipment when many economic activities stopped and tempered private consumption.
“As imports recover, we estimate the current account to revert to deficits equivalent to 0.5 percent of GDP (US$1.9 billion) the current year and a higher 1.9 percent (US$8.1 billion) next year,” the trade group for the global financial services industry concluded.