MANILA – The recovery of developed countries from the global economic crisis could result in higher oil prices and higher food prices, as inputs could become more expensive in the Philippines by next year.

Dr. Peter Lee U, dean of the University of Asia and the Pacific’s (UA&P) school of economics and an expert in the oil industry, said global economic trends point to the possibility of oil prices hitting the $100-a-barrel mark by the first half of 2010.

“Oil prices could [go] up to $70 to $80 per barrel by the end of [2009]. Probably by the first half of next year, we’re [looking at] close to $100 [per barrel] again. If the numbers look good, which will convince markets that the global economy is recovering, then I expect oil prices to maintain the uptrend [in prices],” said U at the sidelines of the Philippine Economic Society’s 47th Annual Meeting in Pasay City.

Based on market data as of November 14, Dubai crude oil prices have already breached the $70-a-barrel level.

To minimize the impact of possible high oil prices by next year, U said the peso should appreciate by around 10 percent.

“These are just hypothetical numbers and I don’t think the peso will appreciate that much. But based on [current] global economic trends, [oil prices] would go up,” he said.

Former agriculture undersecretary and University of the Philippines economist Arsenio Balisacan said the movement of oil prices would certainly have a significant impact on food production next year.

“Food and oil prices are linked. The problem is oil [prices] is starting to pick up again. The big question is how far [prices would go]. The recovery of China, Brazil and Russia will drive speculation,” said Balisacan.

High oil prices in the international market would cause fertilizer prices to spike. Urea, a fertilizer grade and is used in palay production, is a by-product of oil.

Balisacan also said rice farmlands in Central Luzon could take a while to recover from the devastating floods caused by Tropical Storm Ondoy and Typhoon Pepeng.

The typhoons cost the country around P38.316 billion. Agriculture damage was estimated at P27.2 billion, with Central Luzon as the worst hit and accounting for 35.3 percent of the total damage. This was followed by Ilocos region with 33.1 percent and Cagayan Valley with 15.2 percent.

High oil prices and high fertilizer prices in the world market were the major factors that drove up the price of food in the local market in 2008.

For 2010, Balisacan said economic growth rate could be at around 3 percent despite the possible increase in consumer spending due to the presidential elections.

He said this is because of problems in the farm sector and other industries that are still recovering from the extensive damage caused by the twin typhoons.

For the whole of 2009, the Philippine government has already tempered its growth expectations. Full-year economic growth is seen at 0.8 percent to 1.8 percent. Farm growth, meanwhile, was downgraded to a range of 0.5 percent to 1.5 percent, from 3 percent to 3.5 percent set at the start of the year.