Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said Russia’s nearly two-month-long aggression against Ukraine had limited impact on the local banking system.
Indeed, Diokno explained, “the cross-border financial exposure of Philippine banks to Russia and Ukraine is minimal.”
At the end of September 2021, he said cross-border deposits from domestic banks to Russia were only $672,200 and Ukraine was $969,200.
“The sum is less than one percent of total banking system deposits in the same period,” Diokno said. There are no cross-border financial assets between local banks with Russia and Ukraine.
Diokno said only two Philippine banks had total investments amounting to 254.12 million pesos at the end of 2021 in a few Russian banks through their trust departments.
He did not name the two local banks but he identified two Russian banks as VTB Bank Public Joint Stock Company and the Russian Agricultural Bank as having links with some local banks. “That represents less than one percent of their total assets under management,” he added.
Diokno said earlier that the impact of the Russian-Ukrainian war will have a limited impact on the national economy.
He repeated it last Sunday, April 10. He again stated that the economic fallout from the geopolitical tension in Eastern Europe will have minimal impact on the Philippine economy for three reasons: first, the country’s geographic distance from the conflict zone; second, the country’s limited economic and trade ties with Russia and Ukraine; and third, its strong macroeconomic fundamentals.
“The Philippines’ direct trade ties with the two countries are negligible: exports to Russia accounted for only $120 million, or 0.2% of the Philippines’ total exports in 2021 (while) exports to Ukraine s amounted to a paltry $5 million. In short, banks’ trade finance transactions with their Russian counterparts are inconsequential,” Diokno said.
The same goes for the impact of the war on remittances which the head of BSP said earlier is expected to be negligible or less than 1% of the country’s total remittances. “Nevertheless, BSP is aware that the crisis may indirectly affect the flow of overseas Filipinos’ remittances from the two warring countries,” he added.
In March, Diokno said the Russian-Ukrainian war could cut domestic GDP growth by 0.1 percentage point (ppt) and raise the inflation rate to as much as 4.7% this year, beating the target from 2 to 4%.
The war between the two largest countries in Eastern Europe will have an indirect impact on the Philippines through rising oil, energy and food prices.
As for the impact of the war on the exchange rate, Diokno said it will be mitigated, as well as its impact on trade and investment since Russia and Ukraine are not major global traders. Russia’s export and import trade accounted for only 1.9% and 1.5% in 2020, while Ukraine’s share was 0.3% for exports and imports in the same year .
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