The Philippines is among emerging markets likely to suffer the most from expensive oil, according to UK-based think tank Oxford Economics.

“Higher fuel import prices will translate into elevated inflation in Asian and European emerging markets where subsidies are low. Inflation via this channel will be most apparent in the Philippines, Thailand, Poland, India, Hungary and Romania,” Oxford Economics head of global strategy and emerging market research Gabriel Sterne and emerging market economist Lucila Bonilla said in a report.

The Philippines is a net oil importer.

Mainly on the back of surging global prices spilling over locally, Bangko Sentral ng Pilipinas – the central bank – expects headline inflation to average at 4.3 per cent this year, above its two-to-four per cent target range of manageable price hikes conducive to economic growth.

“Countries such as Thailand, the Philippines, Hungary and Poland are the worst-placed when it comes to energy inflation and fiscal impact,” Oxford Economics said.

Oxford Economics noted that the Philippines would spend about 0.2 per cent of gross domestic product (GDP) on subsidies to sectors most badly hit by costly fuel. The government will give away a total of 47.5 billion pesos ($907.5 million) in financial assistance to the bottom 50 per cent income households, public utility vehicle drivers and agricultural producers.

Excess collection from the 12 per cent value-added tax (VAT) levied on oil products will partly finance these dole-outs. At an estimated average global oil price of $110 per barrel in 2022, the government had projected to collect an additional 26 billion pesos in VAT this year.

Also, Oxford Economics said that commodity importers like the Philippines, the Czech Republic, Hungary and Malaysia would be “hurt the most” in terms of wider trade-in-goods deficits as expensive oil and other products would bloat their import bills.

The latest Philippine Statistics Authority data showed that the Philippines’ trade deficit last year widened by 75.7 per cent to $43.2 billion from $24.6 billion in 2020. Imports grew 31.3 per cent to $117.8 billion in 2021, while merchandise exports increased by a slower 14.5 per cent to $74.7 billion. Both goods imports and exports last year exceeded their pre-pandemic 2019 levels.

As of end-February of this year, the trade deficit widened by 47.6 per cent to $8.2 billion as the two-month imports growth of 24 per cent to $20.5 billion exceeded the 11.9-per cent rise in export sales to $12.2 billion.

The yawning trade and current account deficits partly wrought by expensive oil imports were seen further weakening the peso. But Bloomberg reported on April 21 that finance secretary Carlos Dominguez III deemed that the peso’s depreciation remained within “manageable limits”.