Inflation may hit 14.3% on oil shocks – DEPDev

Inflation could spike to as high as 14.3 percent, while overall economic growth may slow if global oil prices continue to surge, Department of Economy, Planning and Development (DEPDev) Secretary Arsenio Balisacan said on Tuesday evening.

At a Senate panel, Balisacan said that under DEPDev’s worst-case scenario, inflation could rise to between 7.4 percent and 8.9 percent this month and accelerate further to 11.4 percent to 14.3 percent in the next.

“I think that’s what we should be most concerned about because inflation has a big impact on [the] overall welfare of ordinary Filipinos,” Balisacan said. “In scenario four and five, actually, we could potentially return to the high inflation [level] in [the] early months of this year, and that’s what we would need to prevent.”

Balisacan outlined five scenarios amid heightened economic uncertainty in the domestic economy, with the fifth being the most severe. This scenario assumes crude oil at $200 per barrel for 180 days. DEPDev estimated that domestic diesel prices could spike by 160.05 percent by April to P154.06 per liter, from a baseline estimate of P59.24 per liter.

By May, diesel prices could rise by 176.49 percent to P162.60 per liter compared with pre–US-Israel-Iran conflict baseline estimates. Gasoline, meanwhile, is projected to increase by as much as 133.17 percent to P135.48 per liter in April and 146.85 percent to P142.38 per liter in May under DEPDev’s worst-case scenario.

Even under the least severe scenario of $100 per barrel crude, inflation is still expected to breach the government’s target range of 2 percent to 4 percent, with the full-year average reaching 4 percent to 4.2 percent.

Inflation rose to 2.4 percent in February, up by 0.6 percentage point from the end of 2025, indicating a faster rise in the overall price level at the start of the year. Bank of the Philippine Islands (BPI) Lead Economist Emilio S. Neri Jr. earlier said on an 18 March episode of the Daily Tribune program Straight Talk that inflation could reach 4 percent by April, also driven by rising oil prices as the Strait of Hormuz remains constrained by the conflict.

Meanwhile, on the longer-term impact of the conflict on the domestic economy, Balisacan said on Tuesday evening that faster inflation and lower remittances — two key drivers of household consumption, which is the main engine of the Philippine economy — could shave between 0.15 and as much as 1.95 percentage points off growth, depending on the severity.

“As you know, almost two thirds of our economy is dependent on domestic ones and household consumption,” Balisacan said. “And so, when the purchasing power is reduced, the impact is quite substantial,” he added.

Growth slowed in 2025 as the flood control scandal weighed on investor confidence and public infrastructure spending, bringing full-year expansion down to 4.4 percent. Balisacan had earlier said the corruption issue shaved about 1.1 percentage points off gross domestic product (GDP) growth — which could face further downside risks as the President’s declaration of a national “energy emergency” amid the Middle East conflict adds to economic pressures.

“We are targeting five to six percent [growth for 2026], hoping that given the hiccups that we had in the last two quarters of last year and persisting, somehow, in the first half, we would at least get to the lower end of target,” Balisacan said.

Under the mildest scenario, growth could decline by 0.15 to 0.20 percentage point to around 5.3 percent to 5.35 percent. This assumes modest inflation pressures and limited remittance slowdown, with only a slight impact on consumer spending.

In the most severe scenario, growth could drop sharply by 1.47 to 1.95 percentage points to between 3.5 percent and 4.0 percent. This outcome would signal significant pressure on household incomes, with inflation eroding purchasing power and remittance-dependent families cutting back on spending.

The President announced on Wednesday afternoon plans to sign a bill suspending excise taxes on oil by “end of day.”