By Tracy Cabrera
BSP COMPLEX, Manila — With inflation accelerating to 4.1 percent in March—more than double last year’s pace—former Bangko Sentral ng Pilipinas (BSP) deputy governor Diwa Guinigundo warned that this signals intensifying price pressures that could push inflation to between 5.0 and 6.0 percent within the year.
Earlier, the Bangko Sentral ng Pilipinas (BSP) acknowledged risks brought about by the prevailing energy crisis, raising its inflation projections for this year and the next to 5.1 percent and 3.8 percent, respectively, from 3.6 percent and 3.2 percent.
“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,” Guinigundo said.
The former BSP executive, now an economist at GlobalSource Partners, added that “rising oil prices, food costs, and early signs of second-round effects are pushing inflation beyond target, while expectations risk becoming unanchored.”
“Higher global oil prices, domestic food supply constraints, and second-round effects such as wage demands and adjustments in transport fares and utilities are driving the shift to more persistent inflation. If oil averages US$100 to US$110 per barrel, headline inflation could remain in the 4.5 to 5.5 percent range through 2026, with core inflation drifting toward 4 percent,” he predicted.
If oil reaches US$120 per barrel, inflation risks could climb above six percent, which may prompt the government to adopt more aggressive policy tightening.
Guinigundo also noted that elevated inflation would weigh on economic growth, mainly by eroding household purchasing power.
Data from GlobalSource estimates that if current conditions persist, gross domestic product growth could slow by 0.5 to 1.5 percentage points from the government’s baseline of around five percent.
“At the extreme, a full stagflation scenario could push growth toward the lower end of five percent while inflation remains elevated, significantly complicating both fiscal and monetary responses,” Guinigundo said, adding that the BSP now faces a “defining moment.”
In closing, the former BSP deputy governor warned that delayed policy action could entrench inflation expectations, weaken the peso, and require sharper tightening later.
“The BSP must act early and credibly. Otherwise, the Philippines risks entering a cycle in which inflation erodes growth, weak growth limits policy space, and policy hesitation deepens both. That is the essence of stagflation. And once it takes hold, it is far harder, and far more painful, to reverse,” he concluded.
ia/xf
