Financial expert: Mideast conflict continues to affect PH economy

National

A SENIOR finance executive warned that the prolonged Middle East conflict continues to ripple through the Philippine economy, shaping inflation, growth, currency movements, and even everyday consumer behavior as households adjust to rising costs.

Frederico “Fritz” Ocampo, Senior Vice President and Department Head of Investment Management, Trust and Investments Group, said during the BDO Business Talk press briefing on Tuesday, May 26, 2026, that the longer the conflict persists, the heavier its economic impact becomes for the Philippines.

He said the economy is facing multiple pressures at once, including slower growth, higher inflation, tighter monetary policy, and continued peso depreciation risks, largely driven by global oil price movements.

Ocampo said the chain reaction starts with oil, which then pushes up transport and food costs before feeding into broader inflation and financial tightening.

He said this global cycle has repeatedly appeared in past crises, including other major geopolitical conflicts.

He also pointed to weakening economic momentum, noting that Philippine GDP growth has already slowed from pre-pandemic levels, with consumption, government spending, and investments all losing strength.

On inflation, he said rising fuel costs directly affect household budgets and spending power, as higher prices reduce disposable income and force consumers to cut back on non-essential purchases.

He stressed that fuel prices strongly influence mobility and behavior in cities.

"Did the traffic in Cebu decrease? Because in Metro Manila, the traffic disappeared. The traffic in Skyway disappeared,” he said, citing reduced movement when gasoline prices surge.

He added that consumer patterns are shifting toward lower-cost alternatives as inflation bites deeper into daily life.

“But those who ate cup noodles, the demand for cup noodles increased,” he said, pointing to defensive consumption trends during periods of financial pressure.

Ocampo said transport behavior is also changing, with rising fuel costs—at one point reaching about P154 per liter—driving stronger interest in hybrid and electric vehicles as Filipinos look for cheaper long-term mobility options.

He also observed strain in corporate earnings, particularly in the consumer sector, where companies have reported weaker performance as spending slows.

On monetary policy, he said inflationary pressures are likely to push the Bangko Sentral ng Pilipinas toward further tightening, projecting possible additional interest rate hikes this year to manage price stability.

He warned that higher interest rates, while necessary to control inflation, could further dampen borrowing, investments, and overall economic activity.

Ocampo also said the peso is expected to remain under pressure as import demand for oil, fertilizer, and other commodities rises.

He explained that higher import bills increase demand for US dollars, which weakens the local currency.

He added that the Philippine stock market may remain range-bound amid uncertainty, reflecting cautious investor sentiment and uneven economic signals.

On financial behavior, he said uncertainty has made investors more defensive. He noted that many individuals are shifting funds into real estate, time deposits, or savings accounts as a short-term safety measure.

“That’s normal behavior because it’s scary,” he said, adding that investors typically avoid risk during periods of geopolitical stress.

However, he said this pattern is expected to shift once confidence returns in the second half of the year, allowing capital to flow back into government securities, REITs, and offshore equities.

Ocampo also discussed long-term investing behavior, emphasizing that crises often discourage investment decisions in the short term as people prioritize financial survival.

Every time there is a crisis, he said, households tend to pause investing decisions and focus on liquidity and stability first.

However, he stressed that markets and economies eventually normalize as geopolitical tensions ease.

He encouraged building investing habits gradually, noting that consistent contributions—even in small amounts—help build long-term financial security once conditions stabilize.

Pat Alvarillo, First Vice President and Department Head of Retail Accounts, said investors today are prioritizing stability and predictable returns amid uncertainty.

She said clients are increasingly favoring fixed-income instruments, including time deposits and fixed-rate bonds, due to the current market environment.

Alvarillo said investors can access a wide range of products through an Investment Management Account, which allows exposure to time deposits.

She added that Unit Investment Trust Funds remain a key entry point for many investors, including money market funds, bond funds, and equity funds, starting at around P1,000 under investment plans designed for regular contributions.

She also cited the Personal Equity and Retirement Account as a long-term retirement vehicle offering tax advantages, subject to holding period and age requirements.

Alvarillo noted that offshore exposure is also available through global equity feeder funds starting at about P200, allowing investors to access international markets.(MyTVCebu)