The high prices that hit the nation in 2018 were blamed by the country’s economic managers on the undue rise in world oil prices. Philippine market prices, as measured by economists in inflation rates, started rising in January that year, hit a three-year high in May with an inflation rate of 4.5 percent, eventually reaching a high of 6.7 percent in September.
There were other factors, according to the economic managers, including, they admitted, the newly enacted TRAIN law that imposed a tariff of P2 per liter on imported diesel, plus price manipulation by some business sectors. But the principal reason, they said, was the big rise in world oil prices.
Today, we are witnessing the opposite development of falling world oil prices. After the coronavirus epidemic started in Wuhan, China, it shut down most of China’s industry and thus its need for huge amounts of oil for its factories. Saudi Arabia and its allies in the Organization of Petroleum Exporting Countries (OPEC) sought to keep prices steady by reducing supply, but Russia, the world’s other major oil producer, refused to go along with this tactic and increased its own production, resulting in a glut in the world’s oil supply and a plunge in world oil prices.
The result has been a corresponding drop in Philippine domestic market prices. Our inflation rate fell to 2.6 percent last month and, it is feared, the average rate for this year 2020 may go down to 1.7 percent.
World oil prices are very low because of low demand in a slowing world economy. Our Philippine economy has been hardest hit in its tourism industry. We have had to ban all visitors from many countries, led by South Korea and China, our two principal sources of tourist visitors. Another big source of our annual dollar income are our Overseas Filipino Workers but many of them are now being sent home because of the coronavirus.
Early this year, the government had high expectations of economic growth, wtth a goal of 6.5 to 7.5 percent Gross Domestic Product (GDP). Since then, there has been a sense among the people that all these expectations may not be realized now that the Philippines, along with the rest of the world, is suffering from a pandemic that has killed thousands of people, shut down much of several national economies, and stopped so many religious and other traditions at this most revered time of the year.
But last weekend, Banko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno, in a social media post, declared he continues to believe that the economic fundamentals “are on our side” and that “even under the worst possible scenario, the Philippines can still grow this year in the medium term by about 6 percent.”
We welcome his optimism, especially at this time when there seems to be a dearth of it among our officials and our people. We have to concentrate at this time on overcoming the coronavirus epidemic, but we need to keep our hopes and our expectations up and be ready to move decisively as soon as the danger passes.