Remittance risks, oil shock cloud Philippines economic outlook

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March 9, 2026 | 12:00am

MANILA, Philippines — The Philippines could face economic headwinds from escalating tensions in the Middle East, with Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. warning that the conflict poses risks to overseas remittances and inflation.

In an interview with CNBC, Remolona said the Philippines is particularly exposed because millions of Filipino workers are based in the region, making remittance flows vulnerable if the conflict intensifies.

“There’s some downside risk in terms of demand for our labor services,” Remolona said. “We’re a major exporter of labor services.”

He noted that around 2.5 million Filipinos are currently working in the Middle East and the money they send home forms a crucial pillar of the Philippine economy, accounting for about 18 percent of total remittances to the country.

Remittances are a key driver of Philippine consumption and a major source of foreign exchange. Any disruption to these flows could affect household spending as well as the peso.

Still, Remolona stressed that the government’s immediate concern is the safety of Filipino workers in the region.

“Our priority in terms of the Filipinos in the Middle East is to keep them out of harm’s way and possibly bring them home,” he said.

Beyond remittances, the BSP chief said the bigger concern for policymakers is the potential inflationary impact of the conflict, particularly through higher global oil prices.

“The bigger issue is the inflationary consequences, the possible inflationary consequences,” Remolona said.

Analysts have echoed this concern, warning that energy market disruptions linked to tensions in the Gulf could ripple across Asian economies, including the Philippines.

In its latest Asia economic report, Nomura Global Markets Research said the region is “at the epicenter of the energy security shock” triggered by tensions involving Iran and disruptions in the Strait of Hormuz, raising the risk of stagflation if supply disruptions persist.

For the Philippines, higher oil prices could translate into faster inflation and weaker external balances. Nomura raised its 2026 inflation forecast for the Philippines to 3.2 percent from 2.5 percent previously due largely to elevated oil prices.

The firm also projects the country’s current account deficit to widen to four percent of gross domestic product from an earlier estimate of 3.7 percent.

The research house expects the BSP to keep policy rates steady this year at around 4.25 percent, compared with its earlier expectation of a rate cut, as the inflation outlook becomes more uncertain.

The Philippines is also structurally exposed to energy shocks because it relies heavily on imported fuel.

According to Nomura, the country sources more than 90 percent of its crude oil imports from the Middle East, making it sensitive to disruptions in energy supply routes such as the Strait of Hormuz.

While the Philippines maintains strategic fuel stockpiles that can cushion short-term disruptions, prolonged supply interruptions could still push up domestic fuel prices and production costs.