World Bank PHL inflation scenario projects 0.62 ppt rise for every $20 crude move

EVERY $20 rise in the price of crude, persisting for six months, is expected to raise Philippine inflation by 0.62 percentage point (ppt), the World Bank said.

It added that Thailand is even more sensitive, with inflation there rising 0.67 ppt for the same crude price movement.

Thailand and the Philippines were described as “among the more exposed economies given their reliance on imported oil,” the bank said in its East Asia & Pacific (EAP) Economic Update 2026.

Philippine inflation surged to a nearly two‑year high of 4.1% in March, breaching the 2-4% target band set by the Bangko Sentral ng Pilipinas, amid rising rice, fuel and electricity costs.

According to the World Bank, in the Philippines,“rising fuel costs are straining the transport sector and driving up logistics and commuting expenses for businesses and households alike.”

“Higher energy and fertilizer prices are likely to feed through to food costs and lower household purchasing power,” it added.

The Philippines is a net importer of oil and sources most of its needs from the Middle East, making it vulnerable to crude price swings.

According to the report, imported inflation via rising oil prices hurts poorer households more, making the effect regressive.

“Household expenditure data from the Philippines … demonstrate that lower-income quintiles allocate a disproportionately larger share of their total consumption to fuel and related transport costs, rendering them highly vulnerable to energy price shocks,” it said.

“Across the region, a sustained 50% increase in fuel prices could lead to a 3-4% loss in income for households in the region through both direct and indirect effects,” it added.

After the Iran war broke out in early March, the government declared a one-year state of national energy emergency to shield the economy from the impact of the crisis.

“The government’s declaration of an energy emergency underscores the severity of the situation. Growth is projected to remain below potential at 3.7%,” the World Bank said.

This projection represents a downgrade of the bank’s January estimate of 5.3%.

If realized, the downgraded projection will fall below the post-pandemic low of 4.4% in 2025 and end up missing the Philippines’ 5-6% GDP target range for 2026.

The 2026 projection for the Philippines was also below the average for the EAP.

“Growth in developing EAP is projected to moderate to 4.2% in 2026, as the conflict in the Middle East raises commodity prices, trade barriers and economic policy uncertainty remain elevated, and the boost from export front-loading ahead of higher tariffs fades,” the World Bank said.

Meanwhile, the World Bank raised its GDP growth projection for the Philippines to 5.6% in 2027 from 5.4% previously.

World Bank Vice-President for EAP Carlos Felipe Jaramillo said that the region’s growth still outperforms much of the world, even in uncertain times. 

“Yet, sustaining growth levels requires countries to confront structural challenges and seize the opportunity of the digital age to increase productivity and create more jobs,” he said.

The report said artificial intelligence could lead to higher productivity.

However, it said that regional adoption remains limited because of gaps in connectivity and skills. — Justine Irish D. Tabile