By Katherine K. Chan, A reporter
OIL PRICE SHOCK may result the Bangko Sentral of the Philippinesnas (BSP) to raise its policy rate ahead of its next meeting in April amid the risk of inflation breaching the central bank’s March target band, an economist said.
Security Bank Chief Economist, Angelo B. Taningco, sees the BSP reversing its policy approach in April but ruled that the central bank still has “room to wait.”
“In this episode of the oil shock, it is widely supported. It also affects other sources of energy, natural gas. And there are negative consequences from this because of the disruption of the ships in the Strait of Hormuz, which I think will not be reopened soon,” said Mr. Taningco told Money Talks with Cathy Yang on One News on Thursday.
“So, in terms of that, controlling inflation expectations, I think the rate hike is appropriate,” he added.
If it does, it will be the first time in two years or since October 2023 that the central bank has tightened its monetary policy.
The BSP has been on an easy path since August 2024, delivering a total of 225 basis points (bps) of cuts to bring the key interest rate to 4.25%.
BSP Governor Eli M. Remolona, Jr. opened the door to a possible rate hike if the price of oil reaches above $100 per barrel amid concerns that it could bring inflation above 4% or at the higher end of their target band.
The next policy meeting of the Finance Board will be held in April 23.
Domestic fuel stores on Tuesday raised oil prices by double digits in the first round of planned dramatic hikes.
The price of gasoline increased by P7 to P13 per liter, diesel increased by P17.50 to P24.25 per liter and kerosene increased by P32 to P38.50 per liter.
This came after the price of Brent crude oil rose by $100 a barrel on Monday for the first time in three years as the ongoing conflict in the Middle East disrupted oil trade.
The attack by the United States and Israel since late February caused Iran to block the Strait of Hormuz, fueling volatility in global oil markets due to concerns about rising oil prices or shortages. This route is used as an important bottleneck through which one-fifth of the world’s oil flows.
Mr. Taningco said the Philippines is facing shocks caused only by prices and not supply problems since “we still have a lot of oil in the world.”
“It’s just that the chokepoint in the Middle East has really disrupted the flow of oil and other energy supplies, so we have this price shock,” he added.
However, Mr. Taningco said it is unlikely that oil prices will increase to $200 a barrel, adding that it has not yet reached the worst case of $140 a barrel expected by the market.
Meanwhile, ING Economics said insufficient buffers and a wide current account deficit put the Philippines at greater risk amid oil price volatility, citing a 17% increase in local fuel prices.
“The Philippines is likely to experience higher oil prices sooner than many of its Asian counterparts, such as Thailand or Indonesia, given the limited fuel supplies, rapid domestic inflation and the current wide current account deficit,” said Deepali Bhargava, head of research for the Asia-Pacific region at ING, in a statement published late Wednesday.
Inflation has increased sharply since December last year, rising to 2.4% in February as more expensive oil, especially gasoline and liquid petroleum gas, weighed on households’ pockets.
According to Ms. Bhargava, how rapidly rising electricity costs will translate into higher prices for transportation, electricity and food will determine the country’s inflation trajectory.
“In our context of oil disruptions that continue for the month, the CPI (consumer price index) inflation of the Philippines is expected to be close to the 4% end of the BSP’s target range,” he said.
Mrs. Bhargava said this could authorize the BSP to be suspended for a long time, ending its two-year easing cycle.
Meanwhile, analyst ING sees the Philippines reaching its growth rate of 5.2% despite uncertainty from last year’s fraud and the war in the Middle East.
“We maintain our 2026 GDP forecast at 5.2%, with only modest increases expected the second half of the year,” said Ms. Bhargava.
“We expect weak growth pressures to continue through the first half of 2026, at least, as ongoing investigations and unresolved political and oil price uncertainties continue to weigh on both business confidence and broader economic sentiment.”
Last year, the Philippines’ gross domestic product (GDP) grew by just 4.4%, the lowest rate since 2020, as the corruption scandal over flood control has had a major impact on investment, government spending and household consumption.
To Mr. However, the ongoing oil crisis calls for long-term government reforms beyond short-term solutions such as subsidies or excise tax freezes to curb growth.
“These temporary solutions regarding fuel subsidy and even the suspension of tax on fuel (should) be timely and well targeted. And that should, I think, be clearly communicated,” he said.
“Furthermore, you should go ahead with other administrative reforms that will help increase investor confidence and be able to at least mitigate the potential slowdown in demand-driven growth,” he added.
Such reforms could help the Philippine economy recover and reach the lower end of the government’s 5%-6% annual growth target, Mr. I’m sorry.
