THE country could see inflation climb to between 5.0-6.0 percent this year as elevated oil prices, food supply pressures and emerging second-round effects push price growth beyond target and complicate policy decisions, a former central bank official said.
“The Philippines is entering a more dangerous phase of inflation, with March 2026 data confirming a shift from temporary supply shocks to a broader, more persistent inflation cycle,” GlobalSource Partners economist and former Bangko Sentral ng Pilipinas (BSP) deputy governor Diwa Guinigundo said.
“Rising oil prices, food costs, and early signs of second-round effects are pushing inflation beyond target, while expectations risk becoming unanchored,” he added.
Inflation accelerated to 4.1 percent in March, sharply higher than the 2.4 percent in February and more than double last year’s pace, signaling that price pressures were intensifying.
The central bank has acknowledged the risks, raising its inflation projection for this year and the next to 5.1 percent and 3.8 percent, respectively, from 3.6 percent and 3.2 percent.
Guinigundo said that higher global oil prices, domestic food supply constraints and second-round effects such as wage demands and adjustments in transport fares and utilities were driving the shift to more persistent inflation.
“If oil averages $100–110 per barrel, headline inflation could remain in the 4.5–5.5 percent range through 2026, with core inflation drifting toward 4 percent,” he said.
“At $120 oil, inflation risks moving above six percent, forcing far more aggressive policy tightening.
Guinigundo said that elevated inflation would also weigh on economic growth, mainly by eroding household purchasing power.
GlobalSource estimated that gross domestic product growth could slow by 0.5 to 1.5 percentage points from the government’s baseline of around five percent if current conditions persist.
“At the extreme, a full stagflation scenario could push growth toward the lower side of five percent, while inflation remains elevated, significantly complicating both fiscal and monetary responses,” Guinigundo said.
The BSP now faces a “defining moment,” he said, warning that delayed policy action could entrench inflation expectations, weaken the peso and require sharper tightening later.
A policy rate increase of 25 to 50 basis points, combined with clear forward guidance, may be sufficient in the near term, provided policy credibility is maintained.
“The BSP must act early and credibly.” Guinigundo said. “Otherwise, the Philippines risks entering a cycle in which inflation erodes growth, weak growth limits policy space, and policy hesitation deepens both.”
“That is the essence of stagflation. And once it takes hold, it is far harder, and far more painful, to reverse.”
