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 鈥渁mong the more exposed economies given their reliance on imported oil,鈥 the bank said in its East Asia & Pacific (EAP) Economic Update 2026.
Philippine inflation surged to a nearly two鈥憏ear 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,鈥渞ising fuel costs are straining the transport sector and driving up logistics and commuting expenses for businesses and households alike.鈥
鈥淗igher energy and fertilizer prices are likely to feed through to food costs and lower household purchasing power,鈥 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.
鈥淗ousehold expenditure data from the Philippines 鈥 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,鈥 it said.
鈥淎cross 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,鈥 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.
鈥淭he government鈥檚 declaration of an energy emergency underscores the severity of the situation. Growth is projected to remain below potential at 3.7%,鈥 the World Bank said.
This projection represents a downgrade of the bank鈥檚 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鈥 5-6% GDP target range for 2026.
The 2026 projection for the Philippines was also below the average for the EAP.
鈥淕rowth 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,鈥 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鈥檚 growth still outperforms much of the world, even in uncertain times.聽
鈥淵et, sustaining growth levels requires countries to confront structural challenges and seize the opportunity of the digital age to increase productivity and create more jobs,鈥 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. 鈥 Justine Irish D. Tabile
