Former BSP deputy governor Diwa Guinigundo. Photo courtesy of BSP.
With inflation accelerating to 4.1 percent this 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 which could see inflation climb to between 5.0 and 6.0 percent within the current year.
Prior to this, the Bangkok Sentral ng Pilipinas (BSP) had acknowledged the risks brought about by the prevailing energy crisis, raising its inflation projection 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 pointed out.
The former BSP executive and now
GlobalSource Partners economist 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.
At US$120 oil, inflation risks have moved above six percent and thus has prompted the government to take steps to initiate far more aggressive policy tightening.
But Guinigundo enthused that elevated inflation would also weigh on economic growth, mainly by eroding household purchasing power.
Date from GlobalSource estimated that if current conditions persist, gross domestic product growth will slow down 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 side of five percent, while inflation remains elevated, significantly complicating both fiscal and monetary responses,” Guinigundo asserted while citing that the BSP now faces a “defining moment.”
In ending, 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.