PIDS: Energy crisis may push up to 3.1M Pinoys into poverty
Millions of Filipinos could be pushed into poverty as rising fuel costs, triggered by the Middle East war, strain household incomes, potentially reversing years of progress in poverty reduction, according to the state policy think tank Philippine Institute of Development Studies (PIDS).
In its latest policy note, the PIDS said the poverty rate in 2026 could rise to 14.4 percent under the least severe energy shock scenario, up from the 13.2 percent baseline in 2025.
This is equivalent to 1.34 million additional Filipinos falling into poverty.
Under more severe scenarios, poverty could climb further to 15.3 percent and as high as 16.3 percent, putting up to 3.1 million Filipinos at risk of slipping below the poverty line.
“Petroleum products underpin key sectors—such as agriculture, transport and electricity—so price increases ripple through supply chains, raising food prices, utility costs and eroding household purchasing power,” the PIDS said.
Uneven impact
“For a country where more than one in eight Filipinos is poor, sustained fuel price increases pose not only a macroeconomic concern but also a welfare challenge,” it added.
The impact is expected to be uneven, with rural households likely to experience sharper increases in poverty due to their heavier reliance on fuel-intensive agriculture, limited income diversification and higher food expenditure shares.
“Impacts are regressive and geographically concentrated. Poor households lose about 16 percent of their annual income, while wealthy households lose only around 3 percent,” the PIDS said, noting that the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM), Bicol, Mimaropa (Mindoro, Marinduque, Romblon, Palawan), the Visayas, and much of Mindanao are most at risk.
According to the policy note, poor households already allocate more than 57 percent of their spending on food, making them particularly vulnerable as higher fuel costs feed into food prices.
The PIDS based its analysis on three fuel price shock scenarios developed by the Asian Development Bank, assuming average oil prices at $105, $125 and $145 per barrel.
At present, prevailing conditions are closest to the first scenario, the think tank said. Global oil prices remain above $100 per barrel, although domestic pump prices have already seen their first rollback since the war started in late February.
The Marcos administration has also suspended excise on kerosene and liquefied petroleum gas (LPG), but has kept levies on diesel and gasoline.
The move has drawn scrutiny for excluding these key products, which actually carry higher levies and are thus more expensive. But the PIDS said targeted cash transfers would be a more effective response than broad-based tax cuts.
More effective response
“A fuel excise tax cut that reduces prices uniformly provides roughly four times more in absolute pesos to a rich household than to a poor household. Only targeted cash transfers can reverse this regressivity by directing support specifically to those least able to absorb the loss,” the PIDS said.
Instead, the think tank said cash transfers are more cost-effective and equitable, partly due to their multiplier effect.
“When low-income households receive transfers, they tend to spend most of the money immediately on food and basic goods, boosting local demand, supporting small businesses and sustaining jobs,” the PIDS said, noting that each peso spent can generate between P1.5 and P2.8 in economic output.
“In times of shocks like a fuel crisis, this helps cushion the downturn, shorten the recovery period, and even support government revenues, making social protection both a social and economic response,” it added.
