By Katherine K. Chan again Sheldeen Joy Talavera, Journalists
ASIAN Development Bank (ADB) is looking to cut it off the Philippines’ growth forecast amid risks from escalating wars in the Middle East and the lingering effects of last year’s flood control problems.
ADB’s Southeast Asia Lead Economist James P. Villafuerte said they will likely revise their initial estimate of the Philippines’ gross domestic product (GDP) growth to 5.3% this year to account for the impact of the Middle East war on inflation, spending and tourism.
“We are reassessing the number because of this new conflict in the Middle East, which will affect our growth forecast,” he told reporters at a briefing in Taguig City on Thursday. “We are also following the progress regarding the issue of corruption, which has already been affected confidence in the flow of investment.”
ADB’s current growth forecast of 5.3% for 2026 is still faster than the 4.4% growth for 2025 when slow investment and household and government spending due to management problems stemming from the flood management corruption scandal took a toll on the economy.
The projection also falls within the Budget Coordination Committee’s target of 5%-6% annual growth.
ADB Chief Economist Albert Park said the ongoing war in the Middle East may have already reduced 0.1% of Southeast Asia’s GDP growth.
He added that the Philippines will see the same level of impact growth if the war lasts for about a month.
Meanwhile, Mr. Park said the oil shock could push inflation to around half a percent by the end of the year.
“Because of how important energy is in the basket of many consumers in the region, even if the war ends today, I think we will see higher inflation this year by about half a percentage point relative to what it would have been without the conflict,” he said.
However, he noted that this is still manageable as most inflation printers in the region, including the Philippines, remain within the target range of central banks.
Headline inflation has accelerated since December last year and has been stable within the Bangko Sentral ng Pilipinas’ (BSP) target of 2%-4% for two straight months.
In February, higher oil prices pushed inflation to 2.4%, the fastest rate in more than a year.
Mr. Villafuerte noted that the Philippines may see the same deflationary impact seen in late 2022 or when Russia’s invasion of Ukraine shook global oil markets if the war in the Middle East lasts as long as the previous one.
Inflation rose to 8.1% in December 2022, bringing the annual average to 5.8% before rising to 6% in 2023.
“So, I think that there is actually a good comparison if this conflict becomes a little longer and the price of oil remains above $100, I think that kind of inflationary impact may be felt in the Philippines,” said Mr. Villafuerte.
Asked if the risks ahead suggest inflation, ADB economists said it may be “too early to speculate,” noting that the current situation remains a short-term shock.
“I think it will have to be quite a long time. I mean, yes, in fact, the war causes slow growth and inflation, but I’m not sure that means inflation, which is often the same as recession. So again, I think it will depend on time,” said Mr. Park.
DIESEL FOR 100 litres?
Meanwhile, some oil companies are still wondering if they can delay the implementation of another possible double-digit price hike this week, which could push diesel to over P100 a liter.
“We are in line with the advice of the DoE (Department of Energy) and are willing to support the amazing implementation like we did last week,” Brigitte Carmel C. Lim, senior vice president and chief executive officer of Cebu-based Top Line Business Development Corp., told BusinessWorld.
Ms. Lim said that although there is upward pressure on fuel prices due to ongoing political developments, it is too early to say confirm the final adjustment.
Independent oil company Jetti Petroleum, Inc. is still evaluating how it will implement this week’s price adjustment.
“We may be implementing this all at once. Or maybe in two phases. Nothing is definitive yet,” said Jetti President Leo P. Bellas.
An industry source told BusinessWorld that diesel prices may increase by P18 per liter starting March 17. On the other hand, gasoline prices may exceed P12 per liter.
Estimates were based on the five-day trading Mean of Platts Singapore, a benchmark used for refined oil products.
The heated conflict between Israel, the United States and Iran has halted maritime traffic in the Strait of Hormuz, “which has severely disrupted procurement due to the loss of crude from the Middle East,” the source said.
As a result, some refineries have closed or implemented cuts, as well as leading to force majeure within Asia, given the region’s heavy dependence on supplies from the Gulf, the source added.
Last week, the Philippines had its highest one-week correction as the price of kerosene ballooned to P38.50 a liter. Some oil companies heeded the government’s call to shake up the big price changes by implementing increases of two to seven stages.
Ms Lim of Top Line said the company continues to offer programs that help customers and transport partners to manage costs, such as discounts per liter and prioritizing fuel access.
IBON Foundation Executive Director Jose Enrique “Sonny” A. Afrika said revising Republic Act No. 8479, or the Downstream Oil Cutoff Act “is very appropriate,” as the country has been over-reliant on oil and imports for nearly three decades.
Enacted in 1998, the law allows oil companies to set and adjust pump prices based on global oil prices and other market factors, instead of waiting for government approval.
“The very basis for the withdrawal of such high-level assets that have such a large impact must be abolished, the law should be repealed, and a new law should be enacted to regulate the oil industry,” he said. BusinessWorld.
Mr. Africa said that the government should be given the power to make the price transparent.
“Oil companies must disclose their import prices, material and storage costs, refining and assembly costs, inventory costs, wholesale and retail, and any transfer prices to the government and the public,” he said.
MONEY, VISITORS IN DANGER
Meanwhile, Mr. Villafuerte said the conflict in the Middle East, especially if it continues for a long time, also poses threats to remittances and tourism in the Philippines.
“So, my concern is that if this goes on for a long time and Filipino workers in the Middle East are affected, that could affect remittances. Although historically, remittances have been very strong,” he added.
According to the National Government, there are more than 2.4 million Filipino migrants and workers based in the Middle East.
The BSP data also showed that OFW remittances increased by 3.3% year-on-year to reach a record high of 35.634 billion dollars by 2025, while 18.19% or 6.481 billion dollars were sent home from the Middle East.
Mr. Villafuerte said OFWs who return home from the Middle East and repatriate their money to the country can increase their short-term income but noted that repatriation may have a negative impact in the long run.
This year, the BSP expects remittances to increase by 3% to $36.6 billion.
