PHILIPPINE economic growth could remain below 5.0 percent and again miss target due to the war in the Middle East, a Cabinet official said.
“We are still targeting 5.0 to 6.0 percent [growth]... but with this impact that we are seeing, that could push us back below 5.0 percent,” Socioeconomic Planning Secretary Arsenio Balisacan told legislators on Tuesday.
“‘[U]nder the worst scenario, we have growth reduced by 0.3 percentage point,” he added.
Economic growth slowed to 4.4 percent last year from 5.7 percent a year earlier, below the 5.5- to 6.5-percent target. The government is aiming for a rebound this year, albeit with a target lowered from 6.0-7.0 previously.
Balisacan said the government was already mobilizing resources and efforts to mitigate the possible effects of the war on inflation, which could breach the 2.0- to 4.0-percent target depending on how high global oil prices climb and how long they remain elevated.
The rate, which rose to 2.4 percent last month, is expected to accelerate to 3.4 percent in March and 3.9 percent in April, with the full-year average at 3.6 percent for 2026 and 3.2 percent in 2027.
Simulations conducted
However, Balisacan said higher oil prices could significantly change that outlook.
Under a scenario where oil prices average about $100 per barrel in March and remain above $80 until May, inflation could rise to between 4.5-5.1 percent this month and between 4.5-4.8 percent in April.
For the full year, inflation could fall between 4.0-4.2 percent before easing to around 3.5-3.6 percent in 2027.
A more severe scenario assumes oil prices reaching about $140 per barrel in March and staying above $80 until September. Under this, inflation could jump to between 6.3-7.5 percent in March and remain elevated at around 6.4-7.5 percent in April.
For 2026, inflation could average between 4.5 and 4.8 percent, and then moderate to around 3.6-3.7 percent in 2027.
Together with weaker remittances, higher consumer prices are expected to reduce household purchasing power and weigh on economic growth.
Balisacan said that in the first scenario, higher inflation could shave around 0.06 to 0.08 percentage point from economic growth. Lower remittances could subtract another 0.12 percentage point, bringing the total impact to 0.20 percentage point.
Under the second and more severe scenario, higher inflation was projected to cut growth by 0.13 to 0.17 percentage point while lower remittances could reduce it by another 0.14 percentage point.
Combined, these factors could reduce economic growth by about 0.30 percentage point, Balisacan said.
“We have identified both the short-term and the long-term actions that we need to do to mitigate the effects of the crisis on the economy and on our workers,” he said.
These include providing assistance to the transport sector, particularly jeepney and tricycle drivers, and interventions that will extend to rail. Excise taxes on fuel prices could also be lowered or suspended.
In the long run, the government wants to “see that we are reducing our dependence on imported oil by increasingly diversifying our sources of energy, particularly renewable and even nuclear power plants,” Balisacan said.
Interventions urged
Business groups, meanwhile, on Tuesday also warned that higher fuel prices due to the war in the Middle East would hinder the country’s economic growth.
“Energy costs affect transportation, logistics, food distribution and manufacturing across the economy,” Management Association of the Philippines President Donald Lim said in a text message.
“If elevated oil prices persist, it could also dampen economic growth as businesses face higher operating costs and consumers reduce spending,” he added.
“For Philippine businesses, this highlights our continued vulnerability to global energy shocks. While companies will have to manage costs and improve efficiency in the short term, the longer-term solution is to accelerate energy diversification and strengthen the country’s energy security to reduce dependence on imported oil.”
Philippine Exporters Confederation Inc. President Sergio Ortiz-Luis Jr. said the government “should step in” as increased fuel prices would affect transport and logistics costs, which was echoed by Philippine Chamber of Commerce and Industry President Perry Ferrer.
Ferrer expressed support for a push to grant President Ferdinand Marcos Jr. emergency powers to implement measures that will absorb and stabilize prices.
“We support whatever means — whether reducing excise tax, VAT (value-added tax) or tapping other funding sources — because we are in a crisis. If the market cannot absorb these pending price increases, our economy will not grow,” Ferrer said in a statement.
“Our request to the government is to absorb temporarily the fuel price increases. Hopefully, the president will be given authority to exercise and use other means that will help cushion potential shocks this week or next week,” he added.
Ferrer also said that the government should reach out to countries like Singapore, Malaysia and South Korea, where most of the Philippines’ refined fuel products are sourced to ensure sufficient supplies and stabilize prices.
He said the private sector had already begun implementing cost-saving measures, including carpooling, work-from-home arrangements, adjusting air-conditioning settings, bulk purchasing and investing in renewable energy such as solar.
“We certainly need to put temporary measures in place immediately to minimize the impact of fuel hikes,” Ferrer said.