Stagflation is no longer a risk—it is now a policy test
The Philippines is entering a more dangerous phase of inflation, with March 2026 data confirming a shift from temporary supply shocks to a broader, more persistent inflation cycle. Rising oil prices, food costs, and early signs of second-round effects are pushing inflation beyond target, while expectations risk becoming unanchored. With the Bangko Sentral ng Pilipinas projecting inflation at 5.1% for the year, the country faces the growing threat of stagflation, in which elevated prices begin to suppress consumption, weaken growth, and constrain policy options.
While the government’s declaration of an energy emergency signals urgency, it risks undermining confidence if not matched by decisive execution. The real solution lies in structural reforms: building a strategic petroleum reserve, securing diversified energy supplies, funding long-term energy resilience through Malampaya revenues, and accelerating the transition to renewables. Combined with a credible and proactive monetary policy response, these measures are essential to stabilize expectations, reduce vulnerability to external shocks, and prevent inflation and slowing growth from reinforcing each other.
Now read on...
Register to sample a report