Inflation in the Philippines could accelerate to above 7% if tensions in the Middle East escalate further and persist longer, the Department of Economy, Planning and Development (DEPDev) said.
Socioeconomic Planning Secretary Arsenio Balisacan presented two possible scenarios during a briefing with members of the House of Representatives on the potential economic impact of the ongoing conflict involving the United States, Israel, and Iran.
In the first scenario, crude oil prices are projected to average around $100 per barrel in March and remain above $80 per barrel until May.
In the second and more severe scenario, crude oil prices could average $140 per barrel and stay above $80 per barrel until September.
Under both scenarios, Balisacan said inflation could breach the government’s target range of 2% to 4% due to higher fuel prices and increases in other commodities, including food.
Under scenario one, inflation may rise to between 4.5% and 5.1% in March before easing slightly to 4.5% to 4.8% in April. For the full year 2026, inflation is projected to average between 4% and 4.2%, before slowing further to 3.5% to 3.6% in 2027.
In the more severe scenario, inflation could reach 6.3% to 7.5% in March and remain at 6.4% to 7.5% in April. For the entire year of 2026, inflation may average between 4.5% and 4.8%, before easing to around 3.6% to 3.7% in 2027.
Prior to the Middle East conflict, the DEPDev had projected inflation to average 3.6% in 2026 and 3.2% in 2027.
The agency also warned of sharp increases in domestic fuel prices under the more severe scenario. Diesel prices could rise by as much as 62% to around ₱96.76 per liter in March, compared with the baseline estimate of ₱59.68 per liter.
Gasoline prices, meanwhile, could increase by up to 52% to about ₱88.79 per liter, compared with the pre-conflict estimate of ₱58.53 per liter.
Oil companies are also expected to implement significant price hikes this week, with gasoline prices projected to increase by ₱7.00 to ₱13.00 per liter, diesel by ₱17.50 to ₱24.25 per liter, and kerosene by ₱32.00 to ₱38.50 per liter.
The surge in oil prices follows the closure of the Strait of Hormuz, a key global shipping route between Iran and Oman and one of the world’s most important oil export corridors.
Balisacan also warned that remittances from overseas Filipino workers (OFWs) could drop significantly if deployment bans and large-scale repatriations are implemented in the Middle East.
Under the first scenario, a total deployment ban and a 10% repatriation of workers from conflict-affected countries could reduce the number of OFWs by about 551,897, with remittances potentially declining by ₱226.6 billion from 2025 levels.
Under the more severe scenario, if deployment bans and repatriations extend to nearby countries such as Egypt, Lebanon, Palestine, Syria, and Yemen, the reduction in OFW numbers could reach about 556,883, with remittances declining by an estimated ₱231.8 billion.
The combined impact of higher inflation and lower remittances could also slow economic growth in 2026 by 0.20 percentage points under the first scenario and by 0.30 percentage points under the more severe scenario.
To mitigate the impact, Balisacan recommended several measures, including the possible suspension of excise taxes on fuel, the implementation of safety net programs for vulnerable sectors, staggered price adjustments, expanded use of low-cost bioethanol, and energy conservation initiatives.
In the long term, he also urged reducing the country’s dependence on imported fuel by promoting renewable energy and streamlining permits for nuclear power projects.
DEPDev earlier estimated that suspending excise taxes on fuel could lower prices by about ₱6 per liter for diesel and ₱10 per liter for gasoline.
Meanwhile, the House ways and means committee on Tuesday approved a substitute bill that would allow the President to suspend or reduce excise taxes on fuel products.
