MANILA, Philippines – The Philippine peso breached the P52 level against the US dollar on Monday, March 7, as global oil prices skyrocket amid Russia’s attack on Ukraine.

The peso closed at P52.18, a level of weakness last seen in 2019.

In a research note to reporters, ING Bank Manila senior economist Nicholas Mapa warned that higher oil prices and a depreciating currency could heat up inflation similar to the levels seen in 2018, when it rose as high as 6.7%.

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno earlier said inflation could surge up to 4.7%, above the central bank’s target band of 2% to 4%, should oil prices soar to $120 to $140 a barrel in 2022.

“The 4.7% forecast suggested by Diokno may only account for first round effects, but the slow burn of higher oil and a depreciating currency could spark a blowup past 5% as it did back in 2018 as inflation expectations get out of hand,” Mapa said.

Oil companies on Monday announced a massive hike in pump prices, with diesel jumping almost P6 per liter.

The House of Representatives is moving for the suspension of tax on select petroleum products.

Despite threats of inflation blowing past expectations, the BSP has maintained an accommodative stance, keeping interest rates low to support the economy amid the pandemic.

Diokno has also cited the country’s hefty supply of gross international reserves as his reason for comfort.

Meanwhile, local equities closed lower on Monday, with the Philippine Stock Exchange index losing 0.7%.

Regina Capital’s Luis Limlingan attributed the decline to the conflict between Russia and Ukraine sparking nuclear fears, as well as the jump in global oil prices. – Rappler.com