Ukraine War’s Bigger Impact on the Philippine Economy

Ukraine
Ukraine
Kyiv Before the Russian Invasion Courtesy of Cityswift – Ireland (Flickr CC0)

The Ukraine war with Russia has had a limited impact on the Philippine trade sector, according to Managing Director Zeno Ronald Abenoja of the BSP Department of Economic Research. In 2021, the Philippines’ total exports to Russia were 0.2% of its total exports ($120 million), and the total exports to Ukraine were $5 million. He said:

These numbers indicate that direct trade linkages are quite very, very low. However, probably the impact, the possible ramifications of the tensions in the European region, could be traced more to the impact of the escalation on our major trading partners, including EU (European Union) and the US.

He said that the Ukraine war’s most significant impact on the country is the elevated oil prices. Lately, the global equity markets have been volatile, with the Philippines’ PSEi index increasing to 10% since Russia invaded Ukraine. The negative impact of the Ukraine war is not surprising given rising prices in imported coal, nickel, oil, wheat, and other commodities.

Ukraine
Courtesy of Rob Nguyen (Flickr CC0)

The significant rise in commodity prices could push up inflation, hurting consumers and businesses, giving rise to higher interest rates, slower economic growth, and higher borrowing costs.

However, Cabinet Secretary Karlo Nograles said the ongoing conflict between Ukraine and Russia gave rise to trade, economic, and human resource implications to the country.

He stated that as part of the government’s proactive response, President Rodrigo Duterte assured the people that contingency plans and mitigating measures are in place:

The conflict in Ukraine has economic, trade, and human resource implications for our country and for our people. As we monitor the current situation, every Filipino has the right to know what the government is doing to prepare for any eventuality.

President Duterte approved the economic team’s recommendations to stabilize food prices, strengthen the domestic economy, and provide social protection.

The Philippine government is also planning to regulate the increase in food costs and non-alcoholic beverages as it accounts for 39% of the average Filipino consumption basket.

Consequently, proposed measures will support farmers by decreasing tariffs and increasing the import of corn, rice, fish, pork, and other soft commodities. Therefore, even if the Ukraine war continues within the next few months, the investors’ sentiment should improve, and stock markets will resume their uptrend.

The government is taking administrative steps to manage inflation. For instance, instead of increasing fares on public utility vehicles, the government will give fuel subsidies to the public transport sectors and farmers to protect them from higher fuel prices. Filipinos will not suffer from higher costs.

Written by Janet Grace Ortigas
Edited by Cathy milne-Ware

Sources:

The Diplomat: Philippines Pledges to Back US if Ukraine Conflict Spreads to Asia; Sebastian Strangio
The Inquirer: Putin’s war on Ukraine and impact on PH prices; by Cristina Eloisa Baclig
PNA: Ukraine-Russia conflict poses implications to PH economy: Palace; by Lade Jean Kabagani

Featured and Top Image Courtesy of Cityswift – Ireland’s Flickr Page – Creative Commons License
Inset Image Courtesy of Rob Nguyen’s Flickr Page – Creative Commons License