Last month, the Philippines’ price growth improved to a four-year low of 1.9%, the lowest since the 1.6% inflation rate recorded in May 2020. In August 2024, the inflation rate was at 3.3%, effectively bringing the national average inflation between January and September 2024 to 3.4%. In September 2023, the inflation rate was higher at 6.1%.
This latest economic figure is seen by most analysts as a perfect condition for gradual interest rate cuts.
The Middle East war could also douse cold water on the country’s aim to get a credit rating upgrade to “A” level before the end of President Ferdinand Marcos Jr.’s term in 2028. Finance Secretary Ralph Recto also earlier said the debt-to-gross domestic product (GDP) ratio has dipped from 60.9% in 2022 to 60.1% in 2023, as economic growth outpaced borrowing.
Cost of war
Analysts whom Vantage Point talked to point to the spiraling war between Israel and Iran’s proxies in the Middle East as a precursor to a possible economic hump. The 180 ballistic missiles which Iran fired at the Jewish State on October 1 in retaliation for the assassination of Hassan Nasrallah, Hezbollah’s secretary general in Lebanon, further escalated the already volatile tension in the region. As of this writing, Israel and the United States are mulling a decisive response to Iran’s latest aggression. It is widely speculated that Israel would torch Iran’s oil facilities, even as Hezbollah’s Iraqi resistance forces threatened to block oil supply to the United States (US) and its allies.
An attack on Iran’s oil infrastructure could provoke Tehran to respond with a strike on Saudi oil facilities, similar to one conducted in 2019 on crude processing facilities there, Any of these events would irretrievably send oil prices considerably higher.
Even prior to the Iraq-Hezbollah’s threat, oil prices had already gone up on worries that the escalating conflict in the Middle East could threaten oil supplies from the world’s top-producing region. Brent futures rose 34 cents, or 0.46%, to settle at US$73.90 per barrel. U.S. West Texas Intermediate crude climbed 27 cents, or 0.39, to settle at US$70.10 per barrel.
Aside from inflation which could lead to a spike in global prices, the Philippines could reel from the negative effects of war in the Middle in these areas:
- Remittances
- The Philippine economy is dependent on remittances from overseas Filipino workers (OFWs), which bring in nearly $10 billion annually. If the conflict jeopardizes the millions of Filipino workers in the Middle East, the economy could be negatively impacted.
- Oil supply
- Our national economy could be affected if the conflict restricts its oil supply. The country’s manufacturing and transportation industries rely on oil.
- Monetary policy
- The Philippines’ Central Bank may delay monetary easing if inflation risks remain. According to the National Economic and Development Authority, the Israel-Hamas war is unlikely to have a major impact on the Philippine economy as long as it doesn’t spread to major oil-producing countries.
No victors
So far, the Israel-Hamas War has claimed the lives of at least 441,430 Palestinians and 1,706 Israelites, and the death toll is rising by the day.
The Middle East conflict is of long standing, having its roots in the creation of Israel in 1948, with a United Nations (UN) Resolution partitioning Palestine into a Jewish and Arab State.
As every keen observer knows, however, the proximate cause of the present conflict is the Hamas-led Palestinian invasion of the Gaza Strip on October 7, 2023, during which Arab militants killed 1,200 people and took 240 others hostage, presumably to use as human shields and, later, as bargaining chips in their demand for the release of their fellow terrorism warriors being held in prisons in Israel.
Israel’s response was quick and brutal. The Israel Defense Force, or IDF, mounted a counter-attack to punish the Arab militants, but it did not make any distinction — perhaps it could not — between combatants and innocent civilians, including children and babies in their mothers’ arms.
The punitive action also destroyed houses, hospitals, community centers, and power and water utility plants.
But restraint is not something one might expect in a war. The objective is to win at any cost and, from Israel’s perspective, destroy the enemy’s ability and resolve to wage war ever again.
That was the objective when Israel invaded Egypt in 1956, when then-president Gamal Abdel Nasser blockaded the Suez Canal, thereby cutting off Israel’s access to the Mediterranean.
Israel failed in that objective. It had to fight anew for its very existence in the 1967 Six-Day War and the 1973 Yom Kippur War. Likewise, hostilities resumed in the 1982 and 2006 Lebanon War.
The IDF has always prevailed, inflicting horrifically high casualties on the enemies every time, but it did not prevent other Arab states or organizations from initiating another war, with the explicit purpose of exterminating the State of Israel and pushing its people back to Germany and Russia, Spain and other Mediterranean countries, and the Middle East, where they were supposed to have come from.
Fierce ally
How did Israel manage to win against Egypt, Jordan, Syria, and Lebanon, which had, in combination, an infinitely larger population, and the support of oil-rich Saudi Arabia?
Israel can always count on the United States, militarily — for both offensive and defensive weapon — as well as financially.
Most important of all, Israel is a First World country. The level of education and training, the ethos and worldview of its people are at par with those of the United States, Great Britain, Japan, and members of European Economic Community. In contrast, the Arab states ranged against Israel are run by dictators who keep their people poor and ignorant.
Israel might as well be the 51st US State. For that very reason, critics say, the US cannot be an honest broker for peace. American politicians are vulnerable to the strong Israeli lobby in the US Congress, which exploits for its purpose the preference and bias of the electorate toward the State of Israel.
The situation begs the question: How do you square up this love for the Jews with the frequent anti-Semitic rallies that flare up in the US from time to time? It is, by the way, a sentiment that former president Donald J. Trump and his Christian nationalist supporters try to turn to their advantage in the run-up to the November 6 US presidential election.
It is clear that a love-hate relationship exists between the Americans and the Jews.
The first part of that dichotomy arises from the belief that the Second Coming of Jesus Christ will be preceded by the return of the Jews to reclaim the land of their ancestors.
According to narratives in both the Old and New Testaments, the Jews were the original inhabitants of Palestine, but they were carried away first to Babylon and, later, at various times in history, to the four corners of the world.
On the other hand, the Jews have been vilified through the centuries for committing the unforgivable crime of deicide. They demanded of Pontius Pilate the crucifixion of the Messiah for blasphemy, to which the Roman prelate reluctantly acquiesced for fear of the mob.
During the Holocaust in World War II where six million European Jews were murdered by Adolf Hitler and his Nazi Germany collaborators, and in the pogroms in Russia and other Eastern European countries before that, and the lingering racial prejudice against this group of people that continues to permeate American society are the direct result of a supposedly Christian article of faith.
As Catholics and Christians, Filipinos cannot understand the Anglo-Saxon belief that the Jews are not white and, therefore, subhuman.
Stop the carnage
What Filipinos share with the Americans is a degree of mistrust against Arabs and Muslims, and that mistrust emanates from their own experience dealing with the MNLF/MILF secessionist movements. The Moro National Liberation Front and the Moro Islamic Liberation Front, respectively, which are both Muslim separatist groups in the southern Philippines. Some of their members engaged in kidnapping, bombing, and other criminal activities that target the Christian populace for the most part.
The negative perception Filipinos have of Muslims is reinforced by stories carried by news outlets on OFWs, mostly housemaids, being abused by their employers in Saudi Arabia, the United Arab Emirates, and other countries in the Middle East.
Most Filipinos, however, want to see a peaceful solution to the ongoing Middle East war, primarily to stop the carnage and, secondarily, to prevent it from spilling over to the rest of the world.
The plight of children caught in the crossfire is too much for many Filipinos to bear.
It has been suggested that Israel draws its might and somewhat cavalier attitude from the US. Until the Americans heed the demand that they stop the arms shipment to Israel, peace in the region will remain elusive.
The outcome of the November 2024 US presidential election will dictate the course of action the American government will take in the coming days.
Vice President Kamala Harris blows hot and cold on the issue for fear of displeasing the pro-Israel elements of the electorate. If she emerges victorious, according to political pundits, the pressure will be gone, and she can afford to do what is right, which is to implement the partition of Palestine into separate Jewish and Arab states. Or at least, that is what she will try to.
It will be a different ball game if Trump claims the presidency for the second time. Under his impulsive and divisive leadership, the world will become much more dangerous, including that part of the Middle East, where so many lives have already been lost.
Oil markets remain calm
Vantage Point, however, observes a relatively calm oil market despite the recent tensions. Could it be that the market has already factored in the projected effects, or has it already been synthesized by past geopolitical panics that have nippily bubbled time and again?
Oil prices climbed just 2.4% after Iran bombarded Israel with hundreds of missiles. Prices rose only slightly the day after, even as Israel vowed to retaliate. It was only last Thursday, October 3, when President Joe Biden left the door open to Israel striking Iran’s oil reserves that markets reacted more strongly. By Thursday afternoon, crude oil prices climbed nearly 5% to $73.50 a barrel. Still, US oil prices remain much closer to their 2024 lows than their highs of nearly $90 last fall.
Yet, dangers still lurk. There is still a real menace that the emerging regional war could spiral out of control causing a destructive spike in oil prices that could upend not just the world economy, but possibly the US presidential election too.
Remember: the region is undeniably the world’s most important oil producer and exporter, the same oil that propels economic growth in most of the world, including the Philippines, and represents the lifeblood of the global economy. – Rappler.com
