THE cost-of-living crisis driven by the US-Iran war and political divisions from Vice President Sara Duterte’s impeachment issue may raise political risks in the Philippines, according to a report by Fitch unit BMI.
“As a net importer of energy, the Philippines is especially vulnerable to higher global energy prices,” said BMI. Pump prices have spiked following the US-Iran war, with gasoline and diesel prices rising by 65.3 percent and 58.4 percent, respectively.
Earlier this month, the Philippine Statistics Authority reported that inflation in the country accelerated to 7.2 percent in April, the highest in over three years, or since March 2023.
“Admittedly, this has tightened household budgets and affected the livelihoods of workers in fuel-intensive sectors like transport,” BMI noted.
While the government has declared a national energy emergency and put targeted interventions in place, the Fitch unit said policy support continues to be constrained due to limited fiscal space.
The group said this led to public frustration from perceived government inaction on increasing fuel prices. It cited numerous strikes by transport workers since March and the Labor Day strike conducted with various labor groups. Based on transport strikes calling for the government to cushion the impact of increasing fuel prices during the 2022 energy crisis caused by the Russian-Ukraine war, BMI said the current cost-of-living crisis could lead to labor unrest.
BMI said further protests and strikes are possible with a prolonged US-Iran war where oil prices remain elevated amid limited government support. It added that the Mass Support Risk Indicator in their proprietary political risk index has begun rising again.
Impeachment, and flood control issues
Aside from the cost-of-living crisis, political divisions associated with Duterte’s impeachment may also heighten social discontent, said BMI.
However, BMI believes that Duterte will be acquitted, given the change in Senate dynamics. Last Monday, after the House of Representatives voted for the vice president’s impeachment, Sen. Vicente “Tito” Sotto III was replaced by Sen. Alan Peter Cayetano as president of the upper chamber.
Since Cayetano is a known Duterte ally, BMI said his rise as Senate President lessens the possibility of Duterte’s conviction. “Indeed, Duterte allies can now shape the pace and narrative of the trial,” it added.
With growing calls for a proper trial, BMI said the Senate refusing to engage in impeachment proceedings or dismissing the case through the trial would be divisive.
“If the Senate overreaches by either stonewalling proceedings or dispensing with a proper trial, this will likely prove divisive given [the] mounting clamor for a proper trial, raising political risks in the Philippines,” it said.
Meanwhile, the BMI said lingering concerns about the flood control controversy add to the existing political risks. It noted that Philippine economic growth also slowed since the controversy erupted in the third quarter of 2025.
It added that the controversy continued to weigh on business and consumer sentiment. Aside from this, government spending also remained subdued; infrastructure spending saw a 31.5-percent annual decline during the first quarter of 2026. Weak infrastructure spending is also expected until the end of the first half of the year, which may further hinder growth.
BMI said that perceptions that high-profile political personalities remain free from accountability may also trigger renewed unrest. It noted a steady rise in the Rule of Law indicator in its Political Risk Index, which signals mounting risks of weakened accountability.
“Notably, Senators Francis Escudero, Joel Villanueva and Jinggoy Estrada — all of whom were allegedly linked to the flood control scandal and flagged for further investigation in a partial report by the Senate Blue Ribbon (Oversight) committee chaired by Senator Panfilo Lacson under the previous Senate leadership — voted for Cayetano as the new Senate president,” said BMI.
“The appearance of impropriety or perceived lack of accountability is likely to undermine the credibility of the corruption probe, which we think will keep political risk elevated in the Philippines,” it added.
