OIL PRICES, INTEREST RATES TOP RISK FACTORS FOR RP, THAI ECONOMIES
MANILA, February 26, 2005 (STAR) By Ted P. Torres - Surging oil prices, higher interest rates and inflationary pressures are among the leading risk factors that could weigh heavily on the economies of both the Philippines and Thailand, monetary officials of both countries said.
In a bilateral meeting attended by Philippine and Thai monetary authorities, the officials agreed that rising world oil prices could derail the economic programs and inflation-targeting scheme of both Southeast Asian countries.
There were reports that the world’s top oil producers are again mulling another price hike while limiting production.
The Organization of Petroleum Exporting Countries (OPEC) has, in fact, started cutting its production, forcing prices to rise. In January, production levels stood at 27 million barrels per day. There were indications that the oil cartel would further reduce output on or before their March 16 meeting.
Last Wednesday, the benchmark Dubai crude soared to $40.90 per barrel, or $1.33 higher than the January average of $37.92. Unleaded gasoline based on the Mean of Platts Singapore (MOPS) benchmark for refined petroleum products likewise surged to a high of $58.53 per barrel last Tuesday, almost $2 higher than the Feb. 21 spot price of $56.98.
At the same time, increasing interest rates and inflation were also ranked among the major risk factor that could affect the two economies.
Capital outflow has been one of Thailand’s concerns in relation to the monetary policies in the short term while the Philippines remained relatively unaffected as there has been significant capital inflow.
"That has helped strengthen the peso vis-a-vis the US dollar lately," Bangko Sentral ng Pilipinas (BSP) Deputy Governor Amando M. Tetangco said.
Meanwhile, property prices have moved in different directions in the two countries. The Bank of Thailand (BOT), the Thai central bank, said that the overall property prices presently reflect the healthy prices prior to the 1997 Asian financial crisis. In the case of the Philippines, however, property prices remained relatively depressed.
"There have been improvements but we are still roughly half of the prices prior to the financial crisis," Tetangco said.
The Philippines was also cited as still among the laggards in the development of the capital markets compared to some of its Asean neighbors.
As of 2002, Malaysia, Korea, Singapore and Australia have developed bond markets accounting for over 50 percent of their respective gross domestic product (GDP). Hong Kong’s capital market accounts for 42 percent of GDP, and Thailand, 38 percent of GDP.
The Philippine bond market, on the other hand, accounts for just 34 percent of GDP, slightly better than India’s 31 percent.
Reported by: Sol Jose Vanzi
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