PHILIPPINE inflation may stay above 6 percent through year-end as potentially weak harvests and the Middle East conflict continue to threaten domestic supplies, according to a congressional think tank.
The Congressional Policy and Budget Research Department (CPBRD) said in a new discussion paper that inflation would remain above the central bank’s target range of 2 percent to 4 percent despite easing in recent months.
CPBRD expects inflation to settle between 6.4 percent and 7.3 percent in the third quarter and between 6 percent and 7.3 percent in the fourth quarter.
Official data showed that inflation averaged 2.8 percent in the first quarter before accelerating to 6.8 percent in the second quarter.
‘Another point of interest is that only one of the 16 forecast runs yielded a CPI with an inflation rate below 6 percent. To wit, even with volatility, it is highly unlikely that inflation will fall below 6 percent in 2026,’ the report noted.
CPBRD said upside risks include weaker-than-expected harvests in the third and fourth quarters due to the monsoon, a possible super El Niño, and fertilizer constraints.
The Middle East conflict could also prolong commodity shortages and raise the cost of imported fuel, fertilizer, and other production inputs. Other risks include elevated electricity rates, peso depreciation, and the pass-through of wage increases to consumer prices.
Based on projections by the Asian Development Bank (ADB), International Monetary Fund (IMF), Organisation for Economic Co-operation and Development (OECD), and Asean+3 Macroeconomic Research Office (Amro), CPBRD said the Philippines is expected to post the highest full-year inflation among the six Southeast Asian economies covered by the study.
The country’s average inflation forecast for 2026 nearly doubled to 5.75 percent from 2.9 percent, marking the largest upward revision at 2.85 percentage points. This was followed by Thailand, Vietnam, and Singapore.
CPBRD emphasized that ‘very high inflation can inflict serious and lasting costs on the economy and the people.’
Persistently high prices erode household purchasing power, weaken consumption and investment, and widen income inequality, according to the think tank.
CPBRD said poor families are hit hardest because food accounts for a larger share of their spending.
It added that high inflation could also prompt further interest rate increases, raising borrowing costs, and weighing on economic growth.
CPBRD urged the government to consider a ‘more conservative fiscal policy’ anchored on a leaner and more carefully targeted national budget.
The approach would trim lower-priority expenditures and limit the need for new taxes, which the study described as ‘non-deflationary in nature.’
‘This entails cuts in lower-priority spending items while continuing transfers to the marginalized to lessen adverse impact on overall consumption,’ it added.
CPBRD also called for measures that would address the economy’s supply constraints and reduce its exposure to external shocks.
These include developing a more resilient and reliable power grid, establishing affordable mass transportation for people and goods, and offering incentives for firms and households to invest in productivity-enhancing or energy-saving initiatives.