Thailand currency

PHL faces risk of imported inflation as currency weakens

PHILIPPINE STAR/ MICHAEL VARCAS

THE PHILIPPINES are among the economies at heightened import riskFdue to the depreciation of its currency, according to Nomura Global Markets Research.

“(In)flation is already above central bank targets in four economies (India, South Korea, the Philippines and Thailand), all of which have sufficient (foreign) reserves to mitigate the pace of depreciation, but that would mean accelerating domestic depreciation, liquidity withdrawals (India falls into this camp) or even higher inflation, if they allow the currency to adjust (the Philippines and Thailand), which which could bring these central banks even closer to exiting policy, in our view,” Nomura said in a note on Monday.

The report, published by research analysts Sonal Varma, Ting Lu, Euben Paracuelles and Jeongwoo Park, classiIfin the Philippines, as well as Thailand and Indonesia, as economies experiencedflation.

Analysts have gauged inflation by looking at the trimmed mean and weighted median consumer price index for these economies.

“For ASEAN-3 in the hot inflation bucket, central banks can afford to be relatively patient for now, but we expect most to pivot in the coming months due to the rising inflation, fiscal or balance of payments risks,” he said. .

Title inflin the Philippines hit a three-year high of 4.9% in April. This reflected the impact of the Russian-Ukrainian war on food, transport and public services.

The central bank expectsflwill hit 4.3% this year, above its target range of 2-4%, amid rising oil and commodity prices.

Nomura said the weak currency could worsen imports inflproduction risk at a time when commodity prices are already high and the supply chain is disrupted.

Closing at 52.493 pesos to the dollar on Monday, the peso is down 2.9% from its level at the end of 2021.

Philippine dollar reserves stood at $106.75 billion at the end of April. This is equivalent to 9.4 months of imports of goods and payments for services and primary income.

The Monetary Council will meet for its third rate setting of the year on May 19. Luz Wendy T. Noble