MANILA, October 30 ------ The depreciating currencies of developing economies that is driving food and fuel prices could worsen the energy and food crisis globally, according to a World Bank report.
Despite the decline of most commodity prices in dollar terms from their peaks that started when Russia attacked Ukraine, 60 percent of oil-importing emerging-market and developing economies saw an increase in domestic-currency oil prices, the World Bank said in its latest Commodity Markets Outlook report.
Nearly 90 percent of these economies also saw a larger increase in wheat prices in their local currencies, the report said. “Although many commodity prices have retreated from their peaks, they are still high compared to their average level over the past five years,” said Pablo Saavedra, the World Bank’s Vice President for Equitable Growth, Finance, and Institutions. “A further spike in world food prices could prolong the challenges of food insecurity across developing countries. An array of policies is needed to foster supply, facilitate distribution, and support real incomes," he added.
The Philippine peso, for example, has depreciated by at least 13 percent against the US dollar. Local pump prices have remained volatile despite some easing and are still higher than the previous average. The country is also affected by the higher prices of wheat since it is milled into flour and turned into bread, which is a staple in the country. Elevated energy prices also have an impact on agricultural production, the World Bank said.
In the first 3 quarters of 2022, food price inflation in South Asia averaged 20 percent. In other regions, including Latin America and the Caribbean, the Middle East and North Africa, Sub-Saharan Africa, and Eastern Europe and Central Asia food price inflation averaged between 12 and 15 percent, the report said. East Asia and the Pacific, meanwhile, is the only region with low food-price inflation partly due to stable prices of rice, it said. But the report said global energy prices, although seen the remain volatile, are expected to decline.
After surging by about 60 percent in 2022, energy prices are projected to decrease by 11 percent in 2023 but it could still be 75 percent above its average in the last 5 years, the World Bank said. Brent crude oil is seen to average $92 per barrel in 2023. The Philippines use Dubai crude as benchmark, which is slightly over $91 per barrel. “The combination of elevated commodity prices and persistent currency depreciations translates into higher inflation in many countries,” said Ayhan Kose, Director of the World Bank’s Prospects Group and EFI Chief Economist, which produces the Outlook report.
Inflation in the Philippines accelerated to 6.9 percent in September, above the 2 to 4 percent target. Some analysts have said it could peak in November and December. The Bangko Sentral ng Pilipinas has raised the benchmark interest rate to 4.25 percent to reign in inflation and stabilize the peso against the dollar that weakened to as low as P59. “Policymakers in emerging market and developing economies have limited room to manage the most pronounced global inflation cycle in decades. They need to carefully calibrate monetary and fiscal policies, clearly communicate their plans, and get ready for a period of even higher volatility in global financial and commodity markets," Kose said.
The Bangko Sentral ng Pilipinas will hold another monetary policy meeting on Nov. 17, a week behind the expected adjustment of the US Federal Reserve.
Source: news.abs-cbn.com
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