Protracted ME conflict to trim GDP growth – DEPDev

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March 11, 2026 | 12:00am

MANILA, Philippines — Escalating tensions in the Middle East involving the United States, Israel and Iran could cut the Philippines’ gross domestic product (GDP) growth by up to 0.3 percentage points this year due to higher oil prices and reduced remittances, according to the Department of Economy, Planning and Development (DEPDev).

During a hearing of the House of Representatives’ committees on energy and trade and industry yesterday, DEPDev Secretary Arsenio Balisacan said the combined effects of high inflation and the reduced remittances from the ongoing Middle East conflict are expected to lead to slower economic growth this year.

Under Scenario 1, he said that Dubai crude price is expected to remain above $80 per barrel until May and then gradually taper off.

“Our estimate is that under Scenario 1, that could slice off 0.2 percentage point of our GDP, of our growth,” he said.

Under the worst scenario of Dubai crude price staying above $80 per barrel until September, he said the GDP growth might be reduced by up to 0.3 percentage points.

“For this year, DBCC (Development Budget Coordination Committee) is still targeting five to six percent (growth). We are assessing the situation when the new number comes in May. But with this impact we are seeing, that could push us back below five (percent),” he said.

Last year, the economy grew by 4.4 percent, slower than the 5.7 percent growth in 2024.

Balisacan said economic activity could slow down this year due to higher inflation and reduced remittances if the Middle East crisis persists.

Under Scenario 1 or modest oil price escalation, he said inflation could quicken to 4.5 to 5.1 percent for this month alone compared to a baseline forecast of 3.4 percent.

In the worst scenario, he said inflation could reach 6.3 to 7.5 percent this month.

“For the entire 2026, inflation would be… above the target inflation by the government of two to four percent. And it could reach close to five percent if the severe scenario would materialize,” he said.

In particular, DEPDev estimates inflation this year to reach four to 4.2 percent under Scenario 1 and 4.5 to 4.8 percent under Scenario 2.

Balisacan said these scenarios assume that the government would take no action.

If the government suspends the excise tax on fuel, he said that the inflation estimates are expected to be lower.

In particular, suspension of the fuel excise tax could lead to 3.6 to 4.2 percent inflation this month under Scenario 1 and 5.4 to 6.6 percent under Scenario 2.

For full-year 2026, DEPDev estimates the suspension of fuel excise tax to lead to inflation of 3.9 to 4.1 percent under Scenario 1 and four to 4.3 percent under the worst scenario.

He said the suspension of fuel excise tax, however, could lower revenue collection and slow down the implementation of crucial projects.

DEPDev estimates total revenue loss of P43.3 billion from the three-month (March to May 2026) suspension of the fuel excise tax, while the revenue loss is at a higher P105.9 billion if the suspension lasts for seven months (from March to September 2026).

Balisacan also said the government also needs to implement a safety net program for vulnerable groups.

Other recommended measures include expanding the use of lower cost bioethanol to reduce fuel prices, energy conservation programs like temporary four-day work week and reducing dependence on imported oil in the long term.

According to Balisacan, a total deployment ban and repatriation of overseas Filipino workers (OFW) could lead to a 65.3-percent plunge in remittances from 2025 levels.

Remittances reached a record-high of $35.63 billion last year.

To address the impact of rising prices, he said that the government needs to ease transport costs for the public.

The Philippine Chamber of Commerce and Industry (PCCI) expressed its support for the grant of emergency powers to President Marcos to implement measures to help stabilize prices amid looming fuel increases brought about by the escalating tensions in the Middle East.

“We support whatever means – whether reducing excise tax, (value added tax) or tapping other funding sources - because we are in a crisis. If the market cannot absorb these pending price increases, the economy cannot go on,” PCCI president Ferdinand Ferrer said.

Ferrer said the private sector is appealing to the government to temporarily absorb or mitigate the impact of fuel hikes to stabilize prices.