S&P: High oil prices may delay BSP rate cuts
HIGH oil prices may prompt the Bangko Sentral ng Pilipinas (BSP) to further delay any rate cuts, according to Standard & Poors (S&P) Global Ratings.
In its latest brief, S&P Global Ratings said the recent spike in oil prices may disrupt any slowdown in the increase in commodity prices, particularly in emerging markets like the Philippines.
High oil prices will have a significant impact on emerging markets that are major energy importers which include the Philippines, Chile, Hungary, Poland, Turkiye, Thailand, and India.
“The recent rise in oil prices, if it persists, threatens to disrupt disinflation across most EMS. This could slow, or delay, central banks’ interest-rate reduction, as they were expected to ease policy in the coming quarters,” S&P Global Ratings said.
Apart from interest rates, the increase in commodity prices could also negatively impact economic growth this year.
S&P Global Ratings expects the country’s GDP to average 5.9 percent. This is lower than the 6 to 7 percent growth target for the year.
However, growth is expected to recover in 2025 to 2027 when
GDP growth could average 6.2 percent, 6.5 percent, and 6.4 percent, respectively.
“Vietnam has seen the strongest rebound in the region with robust tourism activity. The Philippines, Indonesia, and India are yet to see a full travel recovery,” S&P Global Ratings said.
Earlier, the BSP said it remains undaunted by the recent depreciation of the peso as well as the rise in oil prices due to geopolitical tensions in the Middle East.
In a briefing, BSP Governor Eli M. Remolona Jr. told reporters the depreciation of the peso is an “adjustment” that would only have a small impact on monetary policy.
As to the impact of higher oil, Remolona said there is no sense of escalation with regard to the tensions in the Middle East and that “retaliation will not be massive.”
The rise in oil prices has led some analysts to believe that it may prompt the US Federal Reserve to tighten monetary policy further instead of easing it. However, Remolona said this only supported his expectations that the Fed will not ease monetary policy as early as the market anticipates.