AMID concerns that current government subsidies remain heavily concentrated on lower-income groups, the Philippine Institute for Development Studies (PIDS) said relief measures should also be extended to middle-income households grappling with rising costs of basic goods and services.
In a new policy note, the state think tank said salaried workers and regular commuters belonging to the middle-income sector are also suffering ‘significant welfare losses’ from elevated transport and food costs triggered by the global oil shock.
While low-income households remain the most vulnerable because of limited income buffers and higher sensitivity to increases in essential goods, PIDS noted that middle-income Filipinos are also increasingly exposed to inflation despite receiving less direct government support.
‘To address this gap, complementary measures such as fare subsidies, tax relief on essential goods, and temporary adjustments to personal income tax brackets help preserve real purchasing power,’ PIDS said.
‘Complementary measures on social welfare should uplift not only the marginal group but also the expected price hike absorbers like the middle-income groups,’ it also said.
The recommendations come as the Philippines continues to grapple with the economic fallout from the conflict between the United States-Israel tandem and Iran, which disrupted global oil markets and drove up fuel prices worldwide.
As a net oil-importing economy that sources around 98 percent of its fuel requirements overseas, the country remains highly vulnerable to global supply disruptions and price volatility, according to the report.
PIDS said higher oil prices ripple through the economy through rising transportation, logistics, electricity and production costs, eventually pushing up the prices of essential goods and services.
The report added that higher global oil prices also tend to weaken the peso, making imports more expensive and further eroding household purchasing power. Latest government data showed inflation has already accelerated to 7.2 percent in April, the fastest pace in three years, while economic growth slowed to 2.8 percent in the first quarter.
PIDS warned that these conditions could generate ‘stagflationary pressures’ marked by persistently high inflation alongside weaker economic activity, complicating macroeconomic management.
While the report acknowledged calls to suspend fuel excise taxes, it cautioned that blanket relief measures could weaken fiscal buffers and disproportionately benefit higher-income households that consume more fuel.
Instead, PIDS said government intervention should remain targeted, temporary, and fiscally sustainable in the near term.
‘Fiscal measures should remain well-calibrated and temporary, consistent with the need to protect vulnerable groups without undermining fiscal sustainability. This temporary relief will anchor expectations and adjustments for a higher baseline for energy costs,’ it said.
The report also advocated for a ‘countercyclical and resilience-oriented fiscal framework’ which combines short-term targeted relief measures with longer-term structural reforms aimed at reducing the country’s vulnerability to external oil shocks.