The depreciation of currencies around the world is driving up food and fuel prices that could prolong pressures that quicken inflation in most developing economies such as the Philippines.
In their latest Commodity Markets Outlook report, the World Bank said authorities in affected countries “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.”
The report found that in US dollar terms, the prices of most commodities have declined from their recent peaks amid concerns of an impending global recession.
For example, the price of the benchmark Brent crude oil decreased by 6 percent during the period that spans the third week of February—when Russia invaded Ukraine—up to the end of September.
Even then, because of the shrinking value of currencies, about three in every five oil-importing emerging-market and developing economies saw an increase in domestic-currency oil prices during this period.
Spared from the worst
The World Bank observed that East Asia and the Pacific—where the Philippines is grouped—has been the only region with low food-price inflation. This is partly because of broadly stable prices of rice, the region’s key staple.
“Although many commodity prices have retreated from their peaks, they are still high compared to their average level over the past five years,” World Bank vice president Pablo Saavedra said in a statement.
“A further spike in world food prices could prolong the challenges of food insecurity across developing countries,” Saavedra said. “An array of policies is needed to foster supply, facilitate distribution and support real incomes.”
Ayhan Kose, director of the World Bank’s Prospects Group, said policymakers in emerging markets and developing economies have limited room to manage the most pronounced global inflation cycle in decades.
‘Communicate clearly’
“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,” said Kose.
In a statement, the Bangko Sentral ng Pilipinas said it supports the initiatives of the national government to boost the supply of key food commodities and address supply-side pressures that exacerbate inflation.
“The central bank’s monetary policy actions are also working in tandem with fiscal policy and programs to prevent inflation expectations from becoming more entrenched,” the BSP said.