The Department of Economy, Planning and Development (DEPDev) cautioned Tuesday that inflation in the Philippines could accelerate beyond 7% if the ongoing conflict in the Middle East escalates, pushing global crude oil prices higher.
Socioeconomic Planning Secretary Arsenio Balisacan presented two scenarios before the House of Representatives based on potential oil price movements.
Two Inflation Scenarios:
- Moderate: Crude oil averages $100/barrel in March, stays above $80 until May.
- Severe: Crude oil averages $140/barrel in March, remains above $80 until September.
Under both scenarios, inflation is projected to breach the government’s 2%–4% target band.
“Given the increase in fuel prices, other non-food commodities, and food items, inflation could breach the upper band of the government’s comfortable ceiling,” Balisacan explained.
Prior to the conflict, DEPDev’s baseline forecast estimated inflation at 3.6% in 2026 and 3.2% in 2027.
Fuel Price Impact
Under the severe scenario, domestic fuel prices could spike sharply:
- Diesel: ₱96.76/liter (up 62% from baseline ₱59.68)
- Gasoline: ₱88.79/liter (up 52% from baseline ₱58.53)
Retailers are expected to implement adjustments this week:
- Gasoline: ₱7–₱13/liter
- Diesel: ₱17.50–₱24.25/liter
- Kerosene: ₱32–₱38.50/liter
Strait of Hormuz Closure
The surge in global oil prices follows the closure of the Strait of Hormuz, a critical shipping corridor connecting Iran and Oman. The strait serves as the main route for Gulf oil exports to the Arabian Sea, making it one of the world’s most vital oil passageways.
DEPDev’s warning underscores the vulnerability of Philippine inflation to external shocks, particularly in energy markets.