By Kenneth Christiane L. Basilio, Reporter
THE IRAN war could trim 0.2-0.3% from the Philippines’ gross domestic product (GDP) growth this yr, because the oil shock could drive inflation to above 4% this yr, Department of Economy, Planning, and Development (DEPDev) Secretary Arsenio M. Balisacan said on Tuesday,
At the identical time, the House Ways and Means Committee passed a proposal authorizing President Ferdinand R. Marcos, Jr. to suspend excise taxes on fuel products, advancing a proposal aimed toward cushioning the impact of volatile oil prices on consumers.
“The suspension of excise taxes… could reduce the inflationary effects of oil prices and global oil price escalation,” Mr. Balisacan told lawmakers at a congressional hearing. “Oil prices affect practically all goods and services produced on this economy, so the effect is considerable.”
He said the soaring pump prices will stoke inflation, eroding Filipinos’ purchasing power and weighing on economic activity.
As a net importer of oil, the Philippines is extremely sensitive to sharp fluctuations in global oil prices.
While fuel retailers agreed to stagger this week’s big-time price adjustments, the surging prices risk reigniting inflation.
In keeping with its baseline scenario presented to the House Energy Committee, the DEPDev projected inflation could quicken to 4.5-5.1% this month, and 4.5-4.8% in April, with full-year inflation seen settling at 4-4.2%, above the central bank’s goal band.
In a worst-case scenario where oil prices hit $140 this month and stay above $80 until September, DEPDev said inflation could speed up to six.3-7.5% in March and 6.4-7.5% in April, bringing the full-year print to 4.5-4.8%.
Inflation could settle at 3.5-3.6% in 2027 under its baseline scenario, and at 3.6-3.7% under the second scenario, in accordance with DEPDev’s presentation.
“With this type of inflation, when you don’t do anything, that’s going to hit hard the consumers and substantially reduce household consumption spending, affecting our economy,” Mr. Balisacan said.
Unchecked inflation could drag the country’s full-year growth “back below 5%,” he said, adding that the Development Budget Coordination Committee continues to be targeting 2026 growth of 5-6% and 5.5-6.5% for 2027.
“We’re assessing the situation when the brand new number is available in May. But with the impact we’re seeing, that would push us back below 5%,” he said.
Philippine GDP growth slowed to 4.4% in 2025, the slowest in five years, because the flood control scandal weighed on government spending, investments and consumer spending.
EXCISE TAX SUSPENSION
Mr. Balisacan said the economic impact of continuous increases in gas prices could possibly be tempered by suspending excise taxes, which might help ease the burden on consumers.
“A short lived suspension of excise tax collections could restore a part of the purchasing power,” he said.
The House Ways and Means Committee on Tuesday approved an unnumbered consolidated bill that will give the President special powers to suspend or reduce excise taxes of petrol during national and global emergencies for not more than six months.
Any suspension or cut within the fuel excise tax rate could possibly be prolonged beyond six months through a joint congressional resolution.
Any extension cannot last more than a yr, in accordance with Ways and Means Committee Chair and Marikina Rep. Romero “Miro” S. Quimbo.
He said the bill also requires the President to undergo Congress a report backing his decision to chop the excise tax, including estimates of foregone revenue and the impact on inflation, fuel prices and economic activity.
“We’re depending on the international market. Whatever happens there, we wouldn’t have leverage,” Mr. Quimbo told reporters. “The one thing that we will leverage to cut back fuel prices is by removing excise taxes.”
Moves to suspend the gathering of petrol duties have gained traction in Congress after successive fuel price hikes that can likely drive consumer prices higher.
The Philippine Chamber of Commerce and Industry (PCCI) said it supported efforts to empower Mr. Marcos “to implement measures that can absorb and stabilize prices” amid fuel hikes.
“Our request to government is to soak up temporarily the fuel price increases,” PCCI President Perry A. Ferrer said in a press release. “Hopefully, the President might be given the authority to exercise and use other signifies that will help cushion potential shocks this week or next week.”
A 2017 law previously allowed the federal government to suspend the gathering of excise tax on petroleum products when world oil prices reach $80 per barrel for 3 straight months, but the availability lapsed six years ago.
Mr. Balisacan said revenue losses from the suspension of excise taxes on petrol could reach P43.3 billion if the suspension lasts three months, and P106 billion if prolonged until September.
“In the event you suspend excise taxes, that will mean less revenue collection for the federal government. That will impact our projects and programs and mean less fiscal resources,” he said.
Projections from the Department of Finance showed suspending excise tax collections may lead to P136 billion in foregone revenue, which the department said could widen the federal government’s budget deficit and lift the country’s debt.
“While the results on the revenue is kind of a bit, the web effect on the economy of not doing anything about it’s even worse,” said Mr. Balisacan.
Temporarily halting excise tax collections on fuel products may lead to cheaper fuel and ease inflation, he added.
In keeping with the DEPDev, suspending excise taxes from March to May could help inflation ease to three.6-4.2% in March and three.6-3.9% in April. This might bring full-year inflation at 3.9-4.1% by end-2026, under the baseline scenario.
Alternatively, if global prices remain elevated and excise taxes are suspended from March to September, inflation could settle at 5.4-6.6% in March and 5.5-6.5% in April, with full-year inflation at 4.-4.3%.
For 2027, DEPDev sees inflation settling at 3.5-3.6% under the baseline scenario, and 3.6-3.7% under the worst-case scenario.
DEPLOYMENT BAN?
Mr. Balisacan said remittances from overseas Filipino employees (OFWs) is also affected if the federal government decides to impose a ban on deployment to the Middle East.
The local economy could lose between P226.6 billion and P232 billion if about 550,000 Filipinos are repatriated, he said.
“In the event you assume a complete deployment ban… this reduction represents about 65% of the remittances from the region,” he said. “It’s quite a major impact on our OFWs… and likewise the economy.”
There are an estimated 2.41 million Filipinos in Middle Eastern countries. Greater than 975,000 are stationed within the United Arab Emirates, while others are in Saudi Arabia (813,000), Qatar (250,000), and Kuwait (211,000). There are about 800 Filipinos in Iran and 31,000 in Israel, in accordance with data from the Foreign Affairs department.