Philippines among most vulnerable to oil shock in Asean – Nomura

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March 23, 2026 | 12:00am

MANILA, Philippines — The Philippines and several Southeast Asian economies are among the most vulnerable to a prolonged Middle East conflict and a resulting oil price shock, with risks of higher inflation, weaker growth and potential rate hikes emerging as key concerns.

According to a scenario analysis by Nomura Global Markets Research, oil is a big differentiator for the Association of Southeast Asian Nations (ASEAN) region’s economic fortunes.

“Surging energy prices leave Indonesia, the Philippines and Thailand highly vulnerable,” Nomura said, noting that these economies are particularly exposed as net energy importers, unlike Malaysia and Singapore, which are expected to be “relatively resilient.”

This reinforced the divide in ASEAN between countries hit hardest by higher import costs and those cushioned by stronger external positions and energy exports.

For the Philippines, the risks are especially pronounced under a scenario where Brent crude averages $100 per barrel, as the economy remains heavily dependent on imported energy.

“As a large energy importer, the economy has significant exposures that are amplified under the negative scenario,” Nomura said.

In such a scenario, inflation in the Philippines could go past the two to four percent target of the Bangko Sentral ng Pilipinas (BSP) and household purchasing power could be further eroded, hurting consumption spending.

The report also flagged external vulnerabilities, particularly on remittances and energy supply.

“The country does not maintain strategic oil reserves, so a prolonged conflict could lead to energy supply shortages, which may also be exacerbated by export bans in other sources, particularly China, which accounts for 25 percent of the Philippines’ refined petroleum imports,” it said.

Given these pressures, the central bank may be forced to tighten policy. “BSP remains orthodox in its inflation-targeting mandate and will hike the policy rate aggressively, adding to growth headwinds,” Nomura said.

Under a more favorable scenario where oil averages $75 per barrel, any breach of the inflation target would likely be temporary and seen through by the BSP, particularly if the output gap remains negative, allowing policymakers to keep settings unchanged.

As a result, growth is expected to track the baseline outlook, with policy rates on hold and the government able to proceed with catch-up infrastructure spending rather than shifting to emergency measures to contain an energy crunch and rising inflation.

Fiscal space, meanwhile, is seen as limited. Nomura noted that deficits remain elevated at 5.6 percent of gross domestic product last year, while debt levels are around 60 percent, leaving “limited scope for fiscal support measures.”

Proposed interventions such as fuel tax cuts or value added tax exemptions are expected to “only mitigate the impact on fuel prices marginally.”

Across ASEAN, the divergence reflects both structural and cyclical factors. Countries like Malaysia and Singapore are entering the shock “from a position of strength and above-potential growth,” allowing them to better absorb higher oil prices through stronger external balances and fiscal buffers.

By contrast, more vulnerable economies face a combination of inflation pressures, weaker currencies and tighter financial conditions, particularly if oil prices remain elevated for an extended period.