Philippines among Asian countries most vulnerable to global energy shock
The Philippines is among the most exposed emerging economies in Asia to the Middle East war–induced energy shock, weighed down by its heavy reliance on imported fuel and limited fiscal buffers, the Institute of International Finance (IIF) said.
In a report, the IIF identified the Philippines, alongside Thailand and India, as among the most vulnerable to rising food and energy costs.
The group cited these commodities’ high weight in consumer price index (CPI) baskets and the countries’ exposure to fuel imports and Gulf supply routes, as well as limited capacity to absorb price shocks.
“Combining these indicators highlights a group of economies—most notably Thailand, India, and the Philippines—that have meaningful exposure to prolonged disruption in Gulf energy flows with limited fiscal space to absorb the shock,” the IIF said.
Fuel prices in the Philippines have since posted two rounds of at more than P10 per liter since the war escalated three weeks ago. This came as global oil benchmarks surged past $100 per barrel amid supply disruptions linked to the continued constraints in the Strait of Hormuz.
The national government can only do so much as it does not have any control over fuel prices due to the 1998 Oil Deregulation Law, which liberalized the downstream oil industry and removed price controls. This policy is now under renewed scrutiny as prices climb.
Economic managers have warned that inflation could reach as high as 7.5 percent in March if elevated oil prices persist. State statisticians have also flagged the risk of spillover effects across transport, food, and other key sectors.
“Thailand, India, and the Philippines have the highest combined weights for food and energy in their CPI baskets. Food alone accounts for more than 30 percent in each of these economies, making them particularly exposed to higher fertilizer prices,” the IIF said.
Additional pressure is expected from a weakening peso. As it is, the currency nearly breached the P60-per-dollar level on March 16, touching an intraday low of 59.94 before closing at 59.87, with the slide partly tempered by central bank intervention.
Still, the country’s limited macroeconomic buffers remain a key concern.
“Fiscal policy can play an important role in cushioning vulnerable sectors from energy price shocks. However, fiscal space varies widely across the region,” the IIF said.
The institute noted that governments often absorb price shocks to shield consumers where fuel prices are regulated.
In the Philippines, lawmakers are now racing to approve measures that would allow the president to suspend excise taxes on fuel if global oil prices breach $80 per barrel for a sustained period.
