The most immediate impact of the Russian invasion of Ukraine on the Philippines will be escalating global prices of crude oil, worsening the domestic situation which already felt the eight consecutive upward adjustments on pump prices.
Crude -- already up more than 25 percent this year on surging demand -- piled higher still on Tuesday, with Brent closing in on the $100 mark for the first time since 2014. West Texas Intermediate crude rose 3.7 percent at $94.40 per barrel. Brent North Sea crude was up 2.4 percent at $97.63 per barrel.
If oil prices continue to rise, consumer prices, or inflation rate, will rise which will force authorities to adopt measures to tighten monetary policy, abandoning the present accommodative stance and eventually raising the key policy rate. When this happens banks will be forced to raise their lending rates, thereby escalating business costs of borrowers, especially the small and medium enterprises which are just starting to fixed their operations badly impacted by the pandemic.
Also affected is the local stock market whose effect is more psychological as uncertainty global and markets performance weigh on investors’ sentiment.
On trade, no big impact is anticipated as the Philippines trade with Ukraine is not significant.
Filipinos living in Ukraine may face dislocation, but some of those working there have already opted to come home.
Yesterday Asian markets plunged while oil and haven assets rallied Tuesday after Russia's Vladimir Putin ordered troops into two separatist regions in eastern Ukraine, ramping up geopolitical tensions and fears of a conflict.
Investors were sent running after Putin recognized the independence of two rebel-held areas of Donetsk and Lugansk and sent in ''peacekeeping'' forces.
The jump in oil is compounding worries about inflation around the world, with the Federal Reserve coming under intense pressure to tighten monetary policy to prevent prices running out of control.
That has in turn battered equity markets in recent months, and the latest developments out of Europe led to another day of hefty selling in Asia.
Tokyo, Shanghai, Sydney, Seoul, Mumbai and Taipei dived at least one percent, while there were also losses in Singapore, Bangkok, Manila, Jakarta and Wellington.
(By the Business Staff with AFP report)