The prices of goods and services will certainly go up further as an offshoot of surging oil prices in the world market. Transportation fares are expected to rise immediately amid the successive and sharp increases in pump prices. The labor sector naturally will clamor for a higher minimum wage given the workers’ reduced purchasing power.
The government may suspend excise taxes or other levies attached to the pump prices of gasoline, diesel and other petroleum petroleum products as one option to mitigate the effects of surging oil prices in the world market. But this recourse, though populist and music to the ears of left-leaning groups, will only exacerbate the fiscal problem, do more harm to the economy and ultimately dislocate the labor sector.
The Philippines has weathered similar geopolitical crises in the past that led to a spike in world crude prices. Oil prices then eventually settled, albeit at higher levels, as no crises historically last. The Gulf War in 1990 to 1991 that was triggered by Iraq’s invasion of Kuwait, and the subsequent response of the US that toppled Iraqi strongman Saddam Hussein, more than doubled the international oil prices.
Finance Secretary Carlos Dominguez III does not expect a protracted Ukraine-Russia war but he conceded lingering effects on the domestic economy. Russia is a major oil producer and the largest exporter of natural gas and wheat, while Ukraine is the fourth largest exporter of corn. The disrupted supply chain, especially in wheat and corn commodities, is already increasing the prices of feed wheat and corn—the major feedstock of local hog raisers.
But a stronger economy, one that hosts a vibrant labor sector and generates more business activities, will overcome the collateral damage of the war from other regions. The Philippines now has the opportune time to fully reopen the economy and restore the millions of jobs and small businesses lost during the pandemic.
The economic fallout from COVID-19 is the bigger problem facing the economy. In-person classes and the full lifting of mobility restrictions to allow inter-zonal travels, for one, will revitalize the economy. They will create jobs for the unemployed—who have suffered the most during the pandemic.