Philippines ‘between rock and a hard place’ over surging energy prices

{"text":[[{"start":10.45,"text":"The Philippines is stuck “between a rock and a hard place” as surging energy prices due to the war in Iran puts “very high inflationary risks” on an underperforming economy, its central bank governor has told the FT."}],[{"start":26.439999999999998,"text":"Inflation in the Philippines, which imports 95 per cent of its crude oil, is expected to average 5.1 per cent this year due to higher fuel prices, according to the Bangko Sentral ng Pilipinas (BSP), well above the central bank’s initial target of 2 per cent to 4 per cent."}],[{"start":46.839999999999996,"text":"But the BSP — which is seen by economists as one of the most inflation-focused central banks in the region — held interest rates this week during an unscheduled monetary policy meeting, as it weighs increasing concerns about flagging economic growth."}],[{"start":63.269999999999996,"text":"“We were caught between a rock and a hard place,” governor Eli Remolona Jr said in an interview with the FT. “On the one side we are facing very high inflation risks, but on the other side we are also facing weak growth.”"}],[{"start":78.32,"text":"“Normally, we would have addressed the inflation issue . . . [but] growth was disappointingly weak, and we project it to continue to be weak, so we didn’t want to hurt growth” by hiking rates, he added. "}],[{"start":null,"text":"

"}],[{"start":92.10999999999999,"text":"The Philippine economy expanded 4.4 per cent last year — the slowest pace since the Covid-19 pandemic — in the wake of a corruption scandal and a resulting decline in government spending. The central bank expects growth to continue at the same pace this year before expanding by 5.9 per cent in 2027. "}],[{"start":114.49999999999999,"text":"However, Remolona did not rule out rate rises in the near term, saying it was “a definite possibility” at the BSP’s meeting next month. Any rate increase, however, would depend on second-round effects of higher oil prices on fertiliser and food prices, and wages, Remolona said."}],[{"start":134.29999999999998,"text":"The central bank last cut its benchmark rate in February to 4.25 per cent, as part of an easing cycle that began in August 2024 to boost growth. Markets had expected the recent surge in oil prices to prompt the BSP to raise rates."}],[{"start":null,"text":""}],[{"start":null,"text":""}],[{"start":152.89999999999998,"text":"In recent weeks, investors in markets such as the US have bet that the Federal Reserve would turn more hawkish to rein in inflation in face of surging fuel prices after Iran cut off shipments through the Strait of Hormuz. "}],[{"start":168.28999999999996,"text":"But the BSP’s comments underscored the challenges for central banks in emerging markets to balance inflation with softer growth. "}],[{"start":177.63999999999996,"text":"“If the BSP, which is the major central bank in emerging Asia that historically has been most focused on meeting its inflation target, is concerned more about growth than inflation, it seems unlikely that the region’s other central banks will prove more hawkish,” Barclays’ economists said in a research note."}],[{"start":198.32999999999996,"text":"Remolona said that because current inflation risks were driven by supply-side strains rather than demand, the central bank’s options were limited."}],[{"start":208.77999999999994,"text":"“There is very little monetary policy can do about supply shocks,” he said."}],[{"start":214.26999999999995,"text":"Manila has already taken several fuel-saving measures, instituting a four-day workweek and remote work. President Ferdinand Marcos Jr declared an energy emergency this week, citing an imminent threat to energy supplies."}],[{"start":230.95999999999995,"text":"Other import-dependent south-east Asian countries have taken similar measures or increased fuel subsidies in the face of sustained higher fuel prices."}],[{"start":247.75999999999996,"text":"Such efforts to reduce fuel demand could weigh on growth, Remolona conceded, but he said they were necessary to protect the Philippines’ energy supplies."}],[{"start":258.34,"text":"“I think it will affect some sectors more than others, but it’s the right thing to do. I think overall growth will be better with those measures than without,” he said."}],[{"start":277.9599999999999,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1774855417_9949.mp3"}