JUST as the Philippines appears to be getting a break from soaring inflation, economists warned that rising global oil prices due to renewed tensions in the Middle East are threatening to spoil the reprieve.
Last week, the Philippine Statistics Authority (PSA) reported that inflation eased to 6.1 percent in August, marking its fourth straight month of slower price increases after inflation peaked at 7.2 percent in April.
But Ateneo de Manila University economist Luis F. Dumlao said inflation could climb as high as 7.6 percent in September as higher global oil prices push up domestic pump prices.
In the last two weeks of August, the Department of Energy (DOE) announced back-to-back fuel price increases. On August 18, gasoline prices rose by P2.49 per liter, diesel by P3.84, and kerosene by P5.01.
A week later, gasoline increased by another P1.08 per liter, diesel by P2.31, and kerosene by P0.95.
Industry estimates also point to further increases next week, with diesel potentially rising by P4.50 to P5 per liter and gasoline by P4 to P4.50 per liter, according to the Philippine News Agency.
‘It’s a matter of time. It’s going to be passed on, and it’s usually passed on first to passenger transport…that means usually people who drive, who pay their own gasoline,’ Dumlao said in a recent interview.
Dumlao said fuel price increases are felt more quickly by private motorists because, unlike regulated public transport, they have no fare mechanism that shields them from changes in pump prices.
As fuel costs rise, the impact can also spread to other parts of the economy through higher transport and delivery costs, as well as more expensive farm inputs, eventually putting further pressure on consumer prices.
University of Asia and the Pacific economist Marco C. Agonia likewise warned that peso volatility could add to inflationary pressures by raising the local cost of imported fuel.
‘Peso-dollar rate volatility may build inflation pressures through the fuel channel in the short term, especially with resurgent US-Iran tensions widening the uncertainty premium,’ Agonia told the BusinessMirror.
PSA data showed that transport was among the biggest contributors to August inflation, with inflation in the group accelerating to 13.5 percent from 11.9 percent in July.
Food and non-alcoholic beverages also contributed significantly to overall inflation at 4.6 percent, while housing, water, electricity, gas and other fuels registered 7.9 percent.
Long way to go
Agonia said inflation also faces a longer-term risk from El Niño, which could disrupt rice production and keep food prices elevated.
Rice inflation accelerated to 19.4 percent in August, its highest since July 2024.
‘That said, assuming oil risks wind down and agricultural disruptions remain within tolerable levels, inflation may settle down by late 2027 or into 2028,’ he added.
Meanwhile, Dumlao warned that persistently high inflation could make businesses more cautious about expanding their workforces.
‘They have to talk it out. Unfortunately, the government does not have much resources…but it has to be very structured. How do we lay off? Is it a lateralized layoff? But as much as possible, freeze hiring rather than layoff people,’ he said, when asked how the government and business sector can work together to mitigate the potential impact of elevated inflation on the labor market.
For households, Dumlao said there may be little choice but to ‘tighten our belts’ as higher prices continue to squeeze budgets.
‘Sometimes some people don’t have the luxury, but they have to either work more, double jobs, or for some people, they have to resort to borrowing,’ he also said.