Philippines Must Adapt 2026 National Budget to External Shocks
Albay 2nd district Rep. Joey Salceda, an economist and legislator, urges the country’s economic managers to shape the 2026 national budget considering the ongoing conflict between Israel and Iran. The 2026 national budget must address external shocks to safeguard the economy amid global uncertainties.
Though the Philippines cannot control foreign conflicts, it can manage its fiscal stance. Salceda emphasized that the budget should be crafted to withstand external pressure, protect domestic stability, and secure the purchasing power of Filipino families. “The 2026 budget should be designed to absorb external shocks, preserve domestic stability, and maintain purchasing power for Filipino households,” he said in a statement on June 15.
Impact of Israel-Iran Conflict on Philippine Economy
Tensions between Israel and Iran reflect longstanding strategic hostilities. Despite the recent direct military actions in April 2025, both countries have historically avoided prolonged conflicts. Still, the current situation demands vigilance from Philippine planners.
The Development Budget Coordination Committee (DBCC), which oversees the National Expenditure Program (NEP), must integrate oil price scenarios fully into inflation forecasts. Agencies are called to reflect these risks in their budget proposals. The NEP serves as the foundation for the national budget bill reviewed by the House of Representatives.
Economic Preparedness Over Foreign Alignment
Salceda stressed that the Philippines’ priority is economic readiness, not foreign alliances. The conflict influences the country through oil prices, currency exchange rates, labor disruptions, and import costs. As agencies finalize their budget proposals for 2026, these risks must be accounted for.
Particularly concerning is the Strait of Hormuz, which reports suggest Iran plans to close amid the Gulf crisis. This waterway transports over 20% of global oil supply. The Philippines consumes roughly 471,400 barrels of oil daily.
A $10 rise in Brent crude prices could increase the country’s oil import bill by $4.7 million each day. With an exchange rate of P55 per dollar, this translates to P258.5 million daily or nearly P95 billion annually. These figures should influence the budgets for fuel subsidies, transportation, agriculture, and energy sectors.
Strategies to Mitigate Price Risks
Salceda urged the Department of Energy and related agencies to help private oil importers secure forward contracts to manage price volatility. From April 16 to 25, 2025, the peso slightly strengthened from P56.60 to P56.28 per US dollar. As of May 31, the Bangko Sentral ng Pilipinas reported $105.5 billion in gross international reserves, covering 7.3 months of imports.
While this is a robust position, Salceda warned that external shocks could quickly alter economic conditions. Therefore, the macroeconomic assumptions for the 2026 NEP must reflect this unpredictability.
Inflation and Social Protection Costs Must Adapt
The central bank identifies oil prices as a key driver of domestic inflation. Historical data indicate that sustained oil price rises can add between 0.5 and 1.5 percentage points to headline inflation, depending on severity and duration.
This insight should guide the DBCC in refining inflation forecasts and adjusting social protection program budgets for 2026, according to Salceda. He concluded that proactive fiscal planning is essential to shield Filipino households from global turmoil.
For more news and updates on the 2026 national budget, visit Filipinokami.com.