Philippines braces for oil price surge, warning inflation could hit double digits and growth slow amid Middle East tensions and supply uncertainty
MANILA: The Philippines is preparing for a range of possible impacts from rising oil prices, including a worst-case scenario that could push inflation into double-digit territory and pull economic growth below target this year.
Before the conflict in the Middle East, the Philippines had expected inflation to accelerate to 3.6% this year from 1.7% in 2025, still within its 2% to 4% target, and for the economy to expand 5% to 6% from 4.4% last year.
In a presentation to the Senate on Tuesday, Economic Planning Secretary Arsenio Balisacan outlined five scenarios of varying severity based on different oil price levels and the duration in which those prices held.
Under the most severe scenario, one where oil prices reach $200 per barrel and stay at that level for six months, inflation could surge sharply, reaching 7.3% to 8.6% for the full year, and hitting as high as 14.3% at one point.
Under that scenario, the likelihood of which Balisacan said was “quite low”, economic growth could be reduced by 1.47 to 1.95 percentage points to 3.5% to 4.0%.
“This scenario is really a bit scary if it happens because it could bring us to double-digit inflation which we never had in the last couple of years,” Balisacan said.
Even in the least severe scenario, where oil stays at $100 a barrel for a month, inflation could exceed 4%, while growth could fall by less than a quarter of a percentage point from the government’s 5.5% baseline, Balisacan said.
Oil prices held above $100 a barrel on Tuesday, and Iran has threatened to send oil prices to $200 a barrel.
The Philippines relies heavily on imported fuel for its energy requirements. Energy Secretary Sharon Garin on Tuesday said the Philippines has manageable fuel supply but was working to procure 1 million barrels of oil within and outside Southeast Asia.
She said the Philippines had been assured by sources like South Korea, China, of continued supply.
But Garin told the same Senate hearing that “uncertainty will always be there in the next round of orders.”
