While conflict between Russia and Ukraine “does not involve us directly,” Finance Secretary Carlos Dominguez III said the Philippine economy will still “likely be a collateral damage.”
“It is as if we are hit by a ricocheting bullet,” Dominguez said in his report to President Rodrigo Duterte Monday.
“These indirect shocks are likely to be felt through four major channels—the commodity market, the financial market, investments, and the impact on our fiscal health,” he added.
Dominguez said oil and food prices are expected to go up as Russia is the largest exporter of natural gas and wheat, while Ukraine is the fourth largest exporter of corn.
“The conflict will also likely cause a surge in interest rates or cost of borrowing which was already expected to go up even prior to the crisis because of the US Fed’s tightening of monetary policies. The conflict will increase the perception of risk in investments,” he said.
Investments are likely to decline or at least be on hold in the face of uncertainty, he said.
“All these economic impacts will likely require government support to protect our vulnerable citizens and the critical sectors most affected by the crisis and this will stretch our budget even further,” Dominguez added.
The Finance chief, however, said he does not expect the crisis to be a protracted one.
“We do not expect this crisis to last very long. However, there may be some lingering effects we have had—we have seen similar crises in the past such as the Gulf War in 1990, the Asian financial crisis in 1997, the oil price shock of 2008, and also the first Russia-Ukraine conflict in 2014, and we have weathered all of these crises very well,” he said.
“We have experienced crises whose effects were more severe and direct to the economy. These crises lasted much longer and yet we were able to get through them. Based on these experiences, we are confident that we have the tools and the preparation necessary to help our people through this crisis,” Dominguez added.