The Philippines could emerge as one of Asia’s economic losers, amid the intensifying conflict in the Middle East, analysts warned, as higher global oil prices risk rekindling domestic inflation, eroding the peso’s early-year gains, and complicating efforts by the central bank to support a sluggish economy.
Nomura Global Markets Research estimates that every 10 percent increase in global oil prices could add about half a percentage point to Philippine inflation, which could then dampen key growth drivers such as household consumption and trim economic expansion by roughly 0.07 percentage points.
The conflict escalated after the United States and Israel attacked Iran, which retaliated with missiles and drones aimed at Israel and neighboring countries that host American forces, including the United Arab Emirates, Qatar, Kuwait, Bahrain, Iraq, Jordan, and Saudi Arabia.
In Asia, Nomura said the Philippines, Thailand, India, and South Korea were among the most exposed to higher crude prices because of their heavy reliance on imported energy, while Malaysia could benefit as a net exporter.
“The pass-through to domestic retail fuel prices will be significant and quick, exerting substantial upward pressure on headline inflation,” the Japanese investment bank said.
The war has disrupted traffic through the Strait of Hormuz, a narrow but vital corridor that carries a significant share of the world’s oil exports. This raises fears of supply shocks that could ripple across energy-importing economies.
On the currency side, Nomura said the higher energy prices could bloat the Philippines’ import bill, which could cap the peso’s strength. After sinking to record lows in January, the local currency has gained nearly 2 percent since, tracking a regional upswing amid a broader US dollar weakness.
Preparation is key in today’s volatile world order, where world leaders have learned that they can abuse their powers and even start wars on a whim, bypassing traditional safeguards such as the cowed legislative branch. Countries like the Philippines that are aware of their vulnerabilities should have plans in place in case of such situations, particularly this war in the Middle East that has been telegraphed by American president Donald Trump, weeks in advance.
At this point, we can only hope that our leaders figure out what to do next, regardless of whether they have formulated any plans in advance or not.*
