THE Philippines could see years of progress in poverty reduction, education and living standards eroded by the economic fallout from the Middle East war, the United Nations Development Programme (UNDP) said.
“The Philippines is among the more exposed economies in Asia and the Pacific, and among the harder hit,” the UNDP said in a report, noting the country’s heavy dependence on Middle Eastern crude oil, imported fertilizer and food products, as well as remittances from overseas Filipino workers in the Gulf region.
“The UNDP estimates that the immediate impact of the crisis could set back the Philippines’ human development progress,” it added.
The agency said the immediate effects of the war could set back Philippine human development progress by 0.01 to 0.05 years, with losses expected to deepen if disruptions in global energy and trade routes persist.
“The longer the disruption persists, the greater the development challenge,” it said in the report, noting that the crisis would affect households through three interconnected channels — energy imports, agricultural inputs and labor migration and remittances.
The warning comes after years of steady progress for the Philippines, with poverty having fallen to a record low 15.5 percent in 2023 and income inequality below a Gini coefficient of 40 for the first time in four decades.
However, the UNDP noted that nearly three in 10 Filipinos remained vulnerable to slipping back into poverty and almost 60 percent of the population still lived below the upper-middle-income poverty threshold.
The conflict’s economic consequences have already become evident in key macroeconomic indicators.
Headline inflation accelerated sharply to 7.2 percent in April, driven largely by soaring transport and food costs. Although inflation eased slightly to 6.8 percent in May, the UNDP said underlying price pressures remained elevated, particularly for staple food products.
Transport inflation surged to 21.4 percent, reflecting gasoline inflation of 59.6 percent and diesel inflation of 122.7 percent. Food and non-alcoholic beverage inflation also climbed from 1.8 percent before the escalation of the conflict to 6.0 percent.
At the same time, the peso weakened to around P61.7 against the US dollar in May, marking a record low, while gross international reserves declined to approximately $104 billion.
Growth has also slowed considerably, with the economy expanding by just 2.8 percent in the first quarter and prompting international institutions to downgrade their forecasts.
The World Bank, International Monetary Fund and Asian Development Bank now project Philippine economic growth to fall within a range of 3.7 percent to 4.4 percent this year, significantly below previous expectations.
The UNDP said the initial impact of the war could push more than 35,000 Filipinos below the lower-middle-income poverty threshold of $4.20 per day. This could rise significantly if the conflict continues for a longer period.
“The most exposed groups are informal workers, public-transport drivers, smallholder farmers, remittance-dependent households, women in low-paid service and care work, and young people entering a softening labour market,” it said.
“In an economy where so many households have limited capacity to absorb shocks, even a moderate external disturbance can have a disproportionate effect on welfare,” it added.
The Bangsamoro Autonomous Region in Muslim Mindanao, Bicol, Mimaropa, parts of the Visayas and several Mindanao provinces were identified as among the areas most exposed to the crisis due to weaker development indicators, higher poverty levels and greater vulnerability to rising food and energy costs.
The UNDP said further action may be needed to prevent a temporary external shock from becoming a long-term development setback.
It urged policymakers to maintain price stability, diversify energy supplies, expand targeted social assistance and strengthen support for farmers, workers and small businesses.
“The response should not crowd out the structural reforms, in energy, food systems and social protection, that would reduce the country’s exposure to the next shock,” the UNDP said.
