Remolona: PH facing dual pressure from oil surge, remittance risk
The ongoing war in the Middle East, which hosts more than 2 million Filipinos, could disrupt remittances to the Philippines, the Bangko Sentral ng Pilipinas (BSP) said, potentially straining household budgets already hit by rising oil prices.
“There’s some downside risk in terms of demand for our labor services. We’re a major exporter of labor services,” BSP Governor Eli Remolona Jr. said in an interview with CNBC last week.
“So that’s a concern, but our priority in terms of the Filipinos in the Middle East, is to keep them out of harm’s way and possibly bring them home,” he added.
Data from the BSP showed cash remittances from the Middle East reached $6.5 billion in 2025, about 18 percent of the total inflows.
That share is “very, very significant,” Remolona said, though he stressed that the central bank’s main focus now is the inflationary consequences of the conflict in the oil-rich region.
Violence escalated in the oil-rich region after the United States and Israel attacked Iran, which retaliated and targeted Israel and neighboring countries hosting American forces, including the United Arab Emirates, Qatar, Kuwait, Bahrain, Iraq, Jordan and Saudi Arabia.
The conflict has also disrupted traffic through the Strait of Hormuz, a narrow but critical shipping route that carries a large share of global oil exports.
The disruption has raised concerns about potential supply shocks that would be felt by energy-importing economies such as the Philippines.
Before the upheaval, domestic inflation had already risen to a 13-month high of 2.4 percent in February, though it remained within the BSP’s 2-percent to 4-percent target band.
Remolona warned that the central bank could reverse course and raise interest rates if global oil prices reach $100 a barrel and the US dollar continues its rally.
Both scenarios, he said, could push inflation beyond the central bank’s target range.
The BSP already lowered its key policy rate to an over three-year low of 4.25 percent to support a sluggish economy reeling from a high-profile corruption scandal.
That said, any anti-inflation rate hikes, if needed, could complicate the BSP’s pro-growth campaign, which is already being constrained by slow government spending and still unresolved corruption issues.
In a report, economists at Nomura said the BSP would “likely pivot to a more cautious stance soon.” The Japanese bank raised its inflation forecast for 2026 to 3.2 percent, from 2.5 percent previously.
“With the change in our inflation forecast, which pencils in an upward trajectory to the upper end of BSP’s target in coming months, we remove the final 25-basis point (bp) rate cut we forecast in April and expect BSP to leave the policy rate unchanged,” Nomura said.
“While BSP left the door open to further easing after delivering another 25-bp cut in February, it was clear that future decisions will be guided by data, specifically on inflation,” it added.
