THE Philippine economy faces continued pressure from elevated inflation, rising commodity and fuel costs, and the threat of El Niño, which could affect food production and household spending. Geopolitical tensions in the Middle East could further increase oil and fertilizer prices.

According to Moody’s Analytics in a report released Aug. 7, Philippine inflation eased to 6.2 percent in July from 6.4 percent in June. Despite the decline, the Philippines recorded the highest inflation rate among the six Asia-Pacific economies included in the report.

The figure also remained above the Bangko Sentral ng Pilipinas’ target range of 2 to 4 percent. Additionally, the latest figure showcases a marked increase from the 0.9 percent inflation recorded in July 2025, when price pressures were considerably lower.

Inflation in Vietnam, Indonesia, South Korea, and Taiwan remained within the 2 to 4 percent range, according to the report, while the Philippines recorded a rate above 6 percent.

Furthermore, the report also cited that food prices rose 5.3 percent from a year earlier, while utility and transport costs increased by 8.2 and 11.9 percent, respectively.

“The inflation outlook will largely depend on how developments in the Middle East alter global commodity prices,” Moody’s Analytics stated.

Fuel prices have also added to the country's economic pressures, with fluctuations in global oil prices contributing to higher transportation and operating costs—driven by the conflict in the Middle East. These increases can affect the prices of goods and services as businesses account for higher distribution and production expenses.

Meanwhile, Wage Order No. NCR-27 raised the daily minimum wage in the National Capital Region by Php 60, from Php 695 to Php 755, effective July 25, according to the Department of Labor and Employment (DOLE).

Lea Mangubat, a minimum wage earner, said that the wage increase would support her to provide for her family to cover the basic necessities for everyday life.

“For me po malaking tulong sa akin at sa parents ko para makabawas din sa expenses nila, siyam po kaming magkakapatid ang bunso po ako, and ako palang po ‘yung makakagraduate if ever. For me, as a working student, it’s very important ‘yung salary increase kasi nakakatulong po siya sa expenses ko everyday like food, transportation,” she said.

However, not everyone shared Mangubat’s sentiments. Some expressed concern that the wage hike could also lead to higher prices of basic commodities.

Christian Castillo, a coffee shop barista, welcomed the prospect of earning more to increase his savings and better support his family. However, he worried that the wage increase could be offset by rising prices of basic goods and other daily necessities.

“Sapat naman po ‘yung sixty hanggang sa January. Sana yung mga bilihin hindi rin sumabay sa pagtaas kahit papaano para ganun pa rin ‘yung cost of living, at least nadagdagan ‘yung sa savings namin,” he said.

However, the wage increase could also raise labor costs for flourishing and struggling businesses alike, particularly micro, small, and medium enterprises (MSMEs), prompting DOLE to enforce its Adjusted Measures Program, offering help to the MSMEs affected by the said wage increase.

BSP Governor Eli M. Remolona Jr. also warned that the ₱85 daily minimum wage increase in Metro Manila could create “significant” inflationary pressures. However, he said the central bank would continue to assess the impact of the wage adjustment as it considers incoming economic data.

Remolona also identified El Niño as another major risk to inflation, describing it as a potential “supply shock” that could affect food prices. “There’s a coming El Niño shock,” he said, emphasizing that the central bank is closely monitoring its possible effects.

The situation could worsen as El Niño conditions intensify—with the Philippine Atmospheric, Geophysical, and Astronomical Services Administration (PAGASA) recently forecast a 92-percent chance of a moderate to strong El Niño developing in the fourth quarter of 2026 and lasting into early 2027.

Prolonged periods of hotter and drier weather are expected to pose risks to agricultural production and could drive food prices higher. The Department of Agriculture has warned that a severe dry spell could reduce rice yields by 20 to 30 percent, equivalent to more than half a million metric tons of rice.

It was also reported that elevated inflation emerged as the Philippine economy continues to lose its momentum. The country’s gross domestic product (GDP) grew by 2.3 percent in the second quarter, down from 2.8 percent in the first quarter and marking the weakest growth since the first quarter of 2021.

The subdued growth was partly attributed to weak domestic demand, with private consumption growth declining for the fifth consecutive quarter and private investment falling sharply from a year earlier. Stronger exports and increased government spending provided some support, but were insufficient to offset the broader slowdown in economic activity.

The combination of elevated inflation, higher fuel and labor costs, and potential disruptions to agricultural production could place additional pressure on economic activity. Households may have less disposable income for non-essential spending, while businesses could face higher operating costs that may affect investment and expansion.