MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has issued a statement of vigilance, confirming it is closely monitoring the escalating conflict in the Middle East and its potential “supply shocks” to the Philippine economy.
The warning comes immediately after February inflation data showed a climb to 2.4%, a 13-month high. While this remains within the government’s target range, the sudden eruption of violence involving the United States, Israel, and Iran has introduced new variables.
- Hormuz Crisis: The primary concern is the disruption of the Strait of Hormuz, a vital shipping lane for global oil. As a net oil importer, the Philippines is highly vulnerable to spikes in global crude prices.
- Retaliatory Strikes: Iran’s retaliatory strikes against countries hosting American forces—including those with large OFW populations like the UAE, Qatar, and Kuwait—could impact both remittances and energy security.
- Emergency Powers: President Ferdinand Marcos Jr. is currently seeking emergency powers from Congress to reduce the excise tax on petroleum products if Dubai crude exceeds $80 a barrel.
- Interest Rates: The BSP recently lowered its key policy rate to 4.25% (a three-year low) to support growth, but the Monetary Board signaled it is ready to pivot if inflation begins to spiral.
- Projections: Despite the tension, the BSP currently expects inflation to average 3.6% in 2026 and 3.2% in 2027, viewing potential supply shocks as “temporary” for now.
Economists from Chinabank Research warned that while the BSP remains optimistic, “inflation is expected to pick up quickly as geopolitical tensions persist,” suggesting that the central bank may need to pause further rate cuts.