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THE PHILIPPINE economic system is facing mounting pressure as vul<\/span>nerabilities tied to corporate debt <\/span>and rising household <\/span>debt amid the Middle East con<\/span>flict proceed to check its resilience, <\/span>the Financial Stability Coordi<\/span>na<\/span>tion Council (FSCC) said.\u00a0<\/span><\/p>\n In an announcement following its latest quarterly meeting held last week, the interagency council noted that the local banking sector stays strong, <\/span>but risks are emerging from the <\/span>pro<\/span>longed war within the Middle East.\u00a0<\/span><\/p>\n \u201cGeopolitical risks remain a key source of uncertainty,\u201d Bangko Sentral ng Pilipinas (BSP) Governor and FSCC Chair Eli M. Remolona, Jr. said on Monday.<\/p>\n The FSCC said the country may face higher oil prices, weaker market sentiment, tighter financial conditions, and slower economic growth if the Middle East conflict stays unresolved.<\/p>\n In its latest semestral report on the Philippine economic system, the BSP noted that the Middle East war is anticipated to have limited direct impact on domestic banks, with the brunt likely felt within the industry\u2019s <\/span>operating environment.<\/p>\n It is because the banking system ended 2025 with enough buffers to cushion the threats emerging from the energy crisis, it said. <\/span><\/p>\n Nonetheless, the war could still push borrowing costs up and result in higher household and company debt levels, the FSCC noted.<\/p>\n The FSCC said corporates, particularly those exposed to energy and interest rate-sensitive sectors, could face higher debt servicing costs and narrower profit margins as energy prices rise, and financial conditions tighten.\u00a0<\/span><\/p>\n This, in accordance with the council, could weigh on banks\u2019 asset quality.\u00a0<\/span><\/p>\n \u201cThe Council also noted that rising bond yields could lead on to valuation losses on banks\u2019 securities holdings,\u201d it added. \u201cIf market pressures persist, this may increasingly affect capital buffers.\u201d\u00a0<\/span><\/p>\n Meanwhile, the FSCC told banks to maintain watch of household borrowers\u2019 loan repayment capability amid the continuing crisis.<\/p>\n \u201cWe see pockets of vulnerability in energy- and interest rate-sensitive sectors and in valuation pressures from higher bond yields,\u201d Mr. Remolona said. \u201cNonetheless, the economic system stays on solid footing. Banks have adequate capital<\/p>\n and liquidity buffers to ab<\/span>sorb <\/span>shocks and keep lending to households and firms.\u201d <\/span><\/p>\n WEAKER PROFITABILITY \u201cSustained high energy prices because of a chronic Middle East conflict will impact Asia-Pacific (APAC) banks\u2019 credit profiles, via their loan portfolios and financial channels,\u201d it said in a separate report on Monday.<\/p>\n This is predicated on the credit rater\u2019s recent central scenario wherein oil trade disruptions within the Strait of Hormuz hold until the third quarter of the yr, with global oil prices at a mean of $90-$110 per barrel.\u00a0<\/span><\/p>\n Moody\u2019s Rankings noted that the Philippines heavy reliance on imported oil from the Middle East makes its banking sector more exposed to vulnerabilities. \u00a0 \u00a0<\/span><\/p>\n \u201cBanks in South and Southeast Asia \u2014 especially Bangladesh, the Philippines, Vietnam, Thailand, Indonesia and India \u2014 face heightened challenges because of either their economies\u2019 high energy import dependence from the Middle East, or thinner external buffers and oil reserves, or each,\u201d it said.\u00a0<\/span><\/p>\n The Philippines sources over 90% of its oil from the Middle East, which led domestic pump prices to shoot up when the war disrupted trade within the region.<\/p>\n This has also fueled inflation within the country, with the April headline print at an over three-year high of seven.2%, a situation Moody\u2019s said is squeezing household budgets and increasing debt servicing pressures for consumers and small businesses.<\/p>\n \u201cThis may translate into increased but gradual credit strain on such loans,\u201d the debt watcher added. \u201cNonetheless, given the absence of a macroeconomic hard landing, any deterioration in these portfolios is prone to be moderate.\u201d <\/span><\/p>\n Moody\u2019s also warned that Philippine banks where retail and SME loans account for a big portion of their portfolio could see a drop of their profits.<\/p>\n \u201cBanks with large retail and SME (small and medium enterprises) books \u2014 akin to in Thailand, Indonesia and the Philippines \u2014 could see weaker profitability because of growing impairment charges,\u201d Moody\u2019s Rankings added. \u201cNonetheless, core preprovision earnings will remain broadly sufficient to soak up these costs without threatening solvency.\u201d<\/p>\n Moody\u2019s Rankings also noted that tighter labor conditions within the Middle East because of a chronic conflict risk dampening remittances flows to the Philippines.\u00a0<\/span><\/p>\n \u201cRemittance flows from Gulf Cooperation Council economies are one other risk channel for banks within the Philippines and Bangladesh, given the numerous share of remittances originating from nationals working within the Middle East,\u201d it said. \u201cA protracted conflict introduces uncertainty if labor conditions within the Middle East are significantly disrupted, resulting in softer remittance flows.\u201d<\/p>\n Nonetheless, latest central bank data showed remittances from the region climbed by about 20% to $565.91 million in March from $471.836 million in February, which Moody\u2019s said helped sustain bank deposits throughout the period.\u00a0<\/span><\/p>\n \u201cNonetheless, any material slowdown in remittances would have a negative impact on banking system liquidity and native consumption,\u201d it added.<\/p>\n Mr. Remolona said the FSCC, composed of the BSP, Department of Finance, Securities and Exchange Commission, Insurance Commission, and Philippine Deposit Insurance Corp., is closely monitoring developments surrounding the Middle East conflict and other external aspects to discover and address potential vulnerabilities within the local financial sector.\u00a0<\/span><\/p>\n The council is likewise enforcing stricter oversight of nonbank financial institutions including quasi-banks, investment houses, nonstock savings and loan associations, pawnshops, and trust corporations.<\/p>\n \u201cThe Council can be working to enhance the way it monitors system-wide risks and interlinkages,\u201d FSCC added. \u2014 Katherine K. Chan<\/b><\/p>\n<\/p><\/div>\n <\/p>\n","protected":false},"excerpt":{"rendered":" Towering high-rise buildings are seen in Makati City, April 10, 2026. \u2014 PHILIPPINE STAR\/MIGUEL DE GUZMAN THE PHILIPPINE economic system is facing mounting pressure as vulnerabilities tied to corporate debt and rising household debt amid the Middle East conflict proceed to check its resilience, the Financial Stability Coordination Council (FSCC) said.\u00a0 In an announcement following […]<\/p>\n","protected":false},"author":1,"featured_media":340744,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[5117,17667,24,52139,4595,1901,2384,1189],"class_list":["post-340743","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-conflict","tag-east","tag-financial","tag-fscc","tag-middle","tag-philippine","tag-pressure","tag-system"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/ebiztoday.news\/index.php\/wp-json\/wp\/v2\/posts\/340743","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ebiztoday.news\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ebiztoday.news\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ebiztoday.news\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/ebiztoday.news\/index.php\/wp-json\/wp\/v2\/comments?post=340743"}],"version-history":[{"count":2,"href":"https:\/\/ebiztoday.news\/index.php\/wp-json\/wp\/v2\/posts\/340743\/revisions"}],"predecessor-version":[{"id":340746,"href":"https:\/\/ebiztoday.news\/index.php\/wp-json\/wp\/v2\/posts\/340743\/revisions\/340746"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ebiztoday.news\/index.php\/wp-json\/wp\/v2\/media\/340744"}],"wp:attachment":[{"href":"https:\/\/ebiztoday.news\/index.php\/wp-json\/wp\/v2\/media?parent=340743"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ebiztoday.news\/index.php\/wp-json\/wp\/v2\/categories?post=340743"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ebiztoday.news\/index.php\/wp-json\/wp\/v2\/tags?post=340743"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
<\/b>Then again, Moody\u2019s Rankings said banks within the Asia-Pacific, particularly the Philippines, could see weaker profitability because of higher credit costs if the Strait of Hormuz stays disrupted into the third quarter.<\/p>\n