Iran war drives Philippine inflation above 4%

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MANILA: The Philippine economy is facing renewed pressure as escalating conflict in the Middle East has driven national inflation above the central bank’s target threshold. According to data released on Tuesday, the country’s inflation rate climbed to 4.2% in March, breaching the 2% to 4% comfort range set by the Bangko Sentral ng Pilipinas (BSP). 

This spike is primarily attributed to the "Iran-Israel war," which has caused a volatile surge in global crude oil prices, directly impacting domestic pump prices and electricity costs.

The ‘transport’ sector remains the largest contributor to this upward trend, with consecutive weekly fuel price hikes filtering through to the cost of basic goods and services. Economists warn of ‘second-round effects’ where increased logistics and production costs are passed on to consumers, particularly in the agricultural and retail sectors. 

While the government is weighing the expansion of targeted subsidies for public utility drivers and farmers, the breach of the inflation target may force the central bank to consider a more ‘hawkish’ monetary stance, including potential interest rate hikes, to stabilize the economy and anchor consumer expectations amidst the ongoing regional instability.

Photo Credits: AFP