The country’s current account deficit could spike to more than 5 percent of gross domestic product (GDP) amid oil shocks linked to the Middle East conflict, an officer of research firm Capital Economics said.
“Higher global energy prices also threaten to create balance of payments strains,” the firm’s deputy chief emerging markets economist Jason Tuvey told The Manila Times on Thursday.
A current account deficit occurs when total payments for imported goods, services, and transfers exceed receipts from exports.
The country’s external position faces more pressure, Turvey said, recalling that its net energy imports were already equivalent to 4.2 percent of GDP in 2024.
The Philippines imports 98 percent of its crude oil and gas needs, including refined petroleum products mostly sourced from the Middle East, exposing it to price increases and supply disruptions.
Tuvey said that in a baseline scenario — assuming the Iran war ends by late April — high energy costs alone could push the current account shortfall this year to $20.3 billion instead of $15.5 billion, and $21.9 billion in 2027. Both are 4.0 percent of GDP, up from the previous 3.0 percent.
The Bangko Sentral ng Pilipinas (BSP) also expects a wider current account deficit this year until 2027.
The country could also face additional risks if economic weakness in Middle East economies dampens remittances from overseas Filipino workers. Money transfers from OFWs in the region amounted to about 0.8 percent of GDP in 2024.
The surge in fuel costs could also lift headline inflation by 0.8 percentage point in the coming months, with inflation projected to peak slightly higher than 4 percent — just above the upper end of the BSP’s 2 to 4-percent forecast, Turvey said.
Yet the central bank is likely to prioritize growth risks over a temporary inflation spike, Turvey added.
The BSP Monetary Board has decided to keep key interest rates unchanged at 4.25 percent for next month’s scheduled policy meeting, citing economic uncertainties and hinting of further off-cycle actions.
“We think global energy prices would have to rise a lot further, and severe balance of payments strains to emerge, before interest rates are hiked,” Tuvey said.
He noted that economic momentum had weakened even before the oil shocks, with growth expanding by just 3.0 percent year on year in the fourth quarter of 2025.
Full-year growth is seen to slow to 3.8 percent, down from an earlier forecast of 4.5 percent.