THE Philippines could be one of Asia’s biggest beneficiaries from a Middle East peace deal, with lower global oil prices expected to help tame inflation and provide a modest boost to economic growth.
“The US-Iran peace deal is positive for Asia’s net energy importing economies through lower inflation,” Nomura Global Market Research said on Tuesday.“Thailand, Philippines, India and South Korea stand to gain the most,” it added. Brent crude prices have fallen sharply in anticipation of the agreement, slipping to below $83 per barrel and standing about 25 percent lower than a month ago. The decline followed reports that Washington and Tehran had agreed on the framework of an interim peace deal after more than three months of conflict and disruptions in the Strait of Hormuz. Nomura said the peace deal, if sustained, could mark a turning point for Asia’s energy-importing economies, which have borne the brunt of higher oil prices through elevated inflation, weaker currencies and mounting fiscal pressures. For the Philippines, every 10-percent decline in oil prices could lower consumer price inflation by around 0.5 percentage point, improve the current account balance by 0.37 percentage point of gross domestic product and lift economic growth by approximately 0.07 percentage point, Nomura estimates.It still projected the country’s growth to remain subdued at 4.6 percent this year, below the government’s 5.0- to 6.- percent target. Inflation, meanwhile, is expected to remain above the 2.0 to 4.0 percent target at 5.5 percent. “We expect the impact of lower oil prices to be most visible in the Philippines, which has market-determined fuel prices,” Nomura said. “Lower oil and fertilizer prices can also help keep the lid on food inflation, although with 2026 an El Niño year, medium-term risks to food inflation remain,” it added. The investment bank, however, cautioned that the relief from lower fuel costs would not be enough to completely eliminate domestic price pressures.Headline inflation remains above the Bangko Sentral ng Pilipinas’ (BSP) target range while core inflation — which excludes volatile food and energy items — continues to rise due to the lagged effects of previous increases in energy costs. “This supports our view that BSP’s hiking cycle remains intact, but it is keeping a measured approach, as the drop in headline CPI inflation precludes the need for a more aggressive monetary tightening,” Nomura said. It still expects the central bank to raise benchmark interest rates by a cumulative 75 basis points (bp), including a 25-bp increase at this week’s policy meeting, followed by two additional quarter-point hikes in subsequent meetings. “BSP is likely mindful of the significant risks posed by El Niño, particularly on food inflation,” Nomura noted. It added that while the United States-Iran agreement offers a welcome reprieve, the benefits may take time to fully materialize. The Strait of Hormuz blockade had disrupted not only oil shipments but also the movement of natural gas, fertilizers and other commodities critical to manufacturing and food production. Even after the agreement is formalized, logistical challenges, higher insurance costs and the clearing of stranded vessels could delay a full return to normal conditions. “If headline inflation falls more materially in the near term, due to the drop in oil prices, and core inflation peaks much earlier than our baseline of Q4, we acknowledge the risk that BSP could hike by a lower 50 bp instead of another 75 bp,” it said.
