MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) and private economists yesterday downplayed the impact of the US-Iran conflict on the country’s inflation as well as remittances.
“Too early to make a definitive assessment. Dubai oil prices have to reach $90 per barrel on a sustained not sporadic level to make a difference in our forecast for domestic inflation,” BSP Governor Benjamin Diokno said in a text message.
Based on the assessment of the BSP on Dec. 12, inflation may rise slightly to 2.9 percent for 2020 and 2021 from the projected 2.4 percent in 2019.
Furthermore, Diokno said a provision under Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Law allows the government to suspend the imposition of excise tax on oil products if the price of oil hover at an average of $80 per barrel for three months.
“There is an escape clause in the excise tax on oil products: the additional levy will be suspended if Dubai oil prices hit $80 per barrel on a sustained level for three months,” the BSP chief said.
On remittances, Diokno said most of the overseas Filipino workers are deployed in Saudi Arabia and not in Iran or Iraq.
He said the National Economic and Development Authority (NEDA), as well as the Department of Labor and Employment (DOLE) are in the best position to make the assessment.
Latest data from the central bank showed remittances from OFWs based in the Middle East slipped by 7.8 percent to $5 billion from January to October last year compared to $5.43 billion in the same period in 2018.
Saudi Arabia was the major source of remittances from overseas Filipinos with $1.78 billion, followed by the United Arab Emirates with $1.36 billion, Kuwait with $625.95 million, Qatar with $625.06 million, Bahrain with $267.73 million, and Oman with $175.28 million.
Remittances from Iran only reached $409,000 and from Iraq, $259,00 in the first 10 months of 2019.
Robert Dan Roces, economist at Security Bank, said an escalation of the tension between the US and Iran is not good for the Philippines.
“What’s worrisome at the onset is the effect to remittances if our overseas Filipino workers get demobilized from the region, given that the Middle East is the second largest deployment zone for our countrymen. Second, given that we are net importers of oil, we are sensitive to price shocks,” Roces said.
Union Bank of the Philippines chief economist Ruben Carlo Asuncion said the Aboitiz-led bank expects inflation to average 2.8 percent this year.
“It may be too early to revise, but we need to look closely and evaluate,” Asuncion said.