MANILA - The inflation outlook for the country this year could be revised upwards as oil and other commodity prices soared due to the crisis between Russia and Ukraine, Bangko Sentral ng Pilipinas Governor Benjamin Diokno said Monday.

Inflation settled at 3 percent in January and February this year, but estimates showed it could even reach 4.7 percent if global crude oil price averages at $140 per barrel for the year, Diokno told ANC.

"As a result of Russia’s invasion of Ukraine, global growth will be revised, inflation will rise and of course, it will affect the price of oil and other commodities," Diokno said.

"Now with the surge in world oil prices, in response to the Russian invasion of Ukraine, things have changed of course, the forecast will vary, of course and the appropriate thing to do, because we don’t know exactly where it would end up, is to do a sensitivity analysis," he added.

Diokno said the BSP's "sensitivity analysis" showed that if the Dubai crude averaged at $120 per barrel for the year, inflation could be revised to 4.4 percent from 4 percent.

But if it would average at $140 per barrel, inflation could also reach 4.7 percent for the year, he added.

Dubai crude, which is being used as the country's benchmark oil price, is currently hovering around $110 per barrel.

When asked if the skyrocketing crude oil price, which is felt in local pump prices, could prompt the BSP to hike interest rate sooner, Diokno said the monetary board needs to analyze all available data and not just the current prices.

"We evaluate what happened in the past, we also have our own forecast, and nowcast (or present situation,) and then make a decision on that basis, we don’t decide on the basis of 1 or 2 weeks movement," Diokno said.

"The Philippines is somehow insulated from the ongoing crisis between Russia and Ukraine due to its limited trade relations to either of the 2 countries as well as its strong macroeconomic fundamentals, he said.

Interest rate was kept at 2 percent since November 2020 to support economic recovery. But analysts expect BSP to hike the benchmark borrowing rate this year to rein in inflation. [2 PERCENT https://news.abs-cbn.com/business/12/16/21/bsp-maintains-interest-rate-at-2-percent]

A monetary policy-setting meeting will be conducted on March 24.

With the astronomical prices of oil, the rate hike is now a "must" in the second quarter, an economist earlier said.

Diokno said the oil deregulation law was a "no go" for him since it could be subject to corruption. Suspending the fuel excise tax meanwhile would result in a significant loss to the government.

Targeted assistance, as well as the fuel discount for farmers and fisherfolks, are a "good move," Diokno said.

President Rodrigo Duterte earlier approved a P3-billion fund for fuel subsidy and discounts for farmers affected by the rising oil prices due to Russia's invasion of Ukraine.

• Hontiveros calls for review of oil deregulation as fuel prices spike
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• BSP rate hike 'a must' in Q2 as oil spikes due to Russia-Ukraine crisis: analyst

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