HIGHER global oil prices are beginning to strain Filipino households, a Fitch Group unit said, as rising fuel costs push inflation above target and reduce consumers’ ability to spend.
“We hold a cautious but positive outlook for consumer spending in the Philippines,” BMI said in a commentary on Tuesday.
It noted that inflation had accelerated to 4.1 percent last month from just 2.4 percent in February, breaching the Bangko Sentral ng Pilipinas’ (BSP) 2- to 4-percent target range for the first time since July 2024.
The uptick was largely driven by higher energy prices after fuel prices surged in the wake of war in the Middle East.
Diesel prices in particular have surged by around 80 percent from pre-conflict levels, reflecting the impact of elevated global oil prices. This has translated into higher transportation and production costs, which are being passed on to consumers in the form of more expensive goods and services.
This “will erode household purchasing power and weigh on domestic consumption,” BMI said.
It raised the inflation forecast for 2026 by 0.4 percentage points to 3.6 percent, citing the persistence of higher oil prices. BMI added that while inflationary pressures were expected to remain elevated, they are largely supply-driven in nature.
Real household spending growth is projected to ease to 4.5 percent this year, slightly slower than the 4.7 percent recorded in 2025.
Total household expenditure was forecast to reach P14.1 trillion, a 26.2-percent increase compared to 2019 levels.
“Spending will remain influenced by the elevated inflationary pressures as well as currently high debt levels, along with related debt servicing costs, although a tight labor market will still support spending,” BMI said.
The Bangko Sentral ng Pilipinas (BSP), meanwhile, is expected to keep its policy rate unchanged at 4.25 percent this Thursday as it prioritizes supporting economic growth.
“Given the weak growth backdrop, we think the bank will opt to look past temporary supply-driven price surges and adopt a wait-and-see approach,” BMI said.
The BSP’s policymaking Monetary Board decided to keep key policy rates at 4.25 percent during its off-cycle meeting last month.
