MANILA — Driven by escalating conflict in the Middle East, global oil prices nearing USD 100 per barrel are expected to push Philippine inflation beyond the government’s 4% target threshold this year, according to a leading economist.
After maintaining a steady rate below the target for most of 2025, domestic inflation began a gradual climb early this year. Following a 2% reading in January and a jump to 2.4% in February, experts now warn of a steeper trajectory reminiscent of the economic shocks at the onset of the Russia-Ukraine war four years ago.
Michael Ricafort, chief economist at Rizal Commercial Banking Corporation (RCBC), told the Philippine News Agency that the surge in crude prices—with the U.S. benchmark West Texas Intermediate (WTI) currently at USD 98.32—will trigger a cascade of price hikes across the economy.
“Inflation would likely go up and could potentially breach above the 4 percent upper range of the BSP’s inflation target, as high oil/fuel prices would lead to higher fares, wages, and other prices of other affected goods and services or second-round inflation effects, leading to faster actual inflation and also higher inflation expectations,” Ricafort explained.
The impact is already being felt at the pump, with local diesel prices projected to climb by as much as PHP 17.50 per liter and gasoline by PHP 8.50 per liter in the coming week.
Despite the grim forecast, Ricafort lauded the government’s reliance on targeted subsidies to shield vulnerable sectors. He noted that such measures are a delicate but necessary tool for balancing fiscal health with public welfare.
“Previous administrations/economic teams used targeted subsidies as alternative amid the delicate balance to reduce pass-through of higher prices/mitigating impact inflationary effects while managing limited financial resources to prevent wider budget deficits and prevent incurring additional borrowings/debt,” he said.
Looking ahead, Ricafort anticipates that the Bangko Sentral ng Pilipinas (BSP) may pivot its strategy to ensure price stability, even if it necessitates a temporary slowdown in economic growth.
He suggested that policy decisions may be pursued “even if the unintended consequences include slowing down the economy as part of doing all the necessary measures and utilization of all tools needed to fulfill the mandate of price stability or stable inflation to ensure long-term economic growth and development that is more inclusive.”
In February, the BSP’s Monetary Board reduced key rates by 25 basis points to a three-year low of 4.25%, continuing an easing cycle that began in late 2024. However, the shifting global energy landscape may soon force a recalibration of this accommodative stance.| PNA
