Global disruptions

During the first quarter of this year, the Philippine economy grew 5.4 percent. It was slower than projected and way below the 2025 range of six to eight percent target by the economic managers of President Ferdinand “Bongbong” Marcos Jr. (PBBM). Not included in the economic projections is the sudden breakout of missile exchanges currently taking place between Israel and Iran. While there has been bad blood through these years between these two Middle East (ME) countries, no one expected or predicted this new armed conflict.

And just over the weekend, the United States (US) joined the deadly missile attacks and counter-attacks. From its military bases in the US, Stealth bombers unleashed tons of bombs that targeted three suspected sites of nuclear enrichment facilities inside Iran. Purportedly, the Israel and US missile attacks were preemptive strikes to stop Iran from flexing its nuclear power. Developing its nuclear might came after years of US isolating Iran from the rest of the world as a rogue terror state.

We could only pray that this Israel-US tag team against Iran would not lead other ME countries to enter the fray.

Thank God, our prayers were answered after a ceasefire agreement was reportedly reached among the protagonists in this ME drama. As announced by US President Donald Trump, both Israel and Iran have agreed to stop missile hostilities – for now. But we still hold our breath that this truce will hold.

As expected, however, the crude oil market – composed of the biggest oil-producing ME countries – reacted the way they usually react in any potential supply disruption. As usual, our local refined oil product traders increased their pump prices of gasoline and diesel even if products bought at old, lower prices are still in their stock inventory.

Invoking the Oil Industry Deregulation Law, the government has turned a blind eye by allowing weekly price hikes even if stocks of refined products were bought from previous weeks’ lower prices. After all, the government collects so much revenues from the 12 percent excise tax per liter on all oil products.

Under the Tax Reform for Acceleration and Inclusion (TRAIN) Law, excise tax for petroleum products ranges from P3 per liter to as much as P10, depending on pump prices.

At Malacañang Palace yesterday, PBBM met with his Cabinet economic team, which included Department of Finance (DOF) Secretary Ralph Recto, ostensibly to gear up the Philippine government in the extreme possibilities of a full-blown war in the ME.

Actually, all they have to do is to dust up previous ME preparedness plans and programs.

The latest ME war is not the first. While the Philippines is far from the conflict area, we had experienced the resulting disruptions, especially involving our crude oil supply. In an exclusive interview yesterday with our STAR reporter, Recto disclosed that the government is open to reducing the excise tax on oil products at “trigger points” that include the scenario of crude oil in the world market breaching $80 per barrel.

As gathered from Recto, PBBM’s economic team maintains that such a move is more prudent than providing more “ayuda,” or government subsidies to vulnerable sectors. Since it’s taxpayers’ money again, it will be putting money from one pocket into the other pocket.

Recto is just being consistent with his policy stand when he was then director general of the National Economic and Development Authority (NEDA) during the term of former president Gloria Macapagal-Arroyo. As NEDA chief from 2008 to 2009, Recto constantly called the attention of oil companies over their weekly price increases.

The Department of Energy (DOE), headed at present by acting Secretary Sharon Garin, announced that local refined oil industry players have decided to implement two-step price hikes spread out over this week. According to Garin, the DOE got this commitment from Shell, Seaoil, Petron, Caltex, Jetti, Petro Gazz, Phoenix, PTT Philippines, Unioil, Total, Filpride and Cleanfuel. Call it moral suasion on these local oil players.

The DOE purportedly urged local oil industry players to offer fuel discounts to the transport sector and “exercise prudence in passing on costs” to motorists. As of this writing, Garin is set to meet yesterday with transportation and agriculture officials to plan targeted subsidies for public transport drivers and farmers. As of latest DOE monitoring, the average price of Dubai crude declined to $69 per barrel yesterday, from the previous $75.16 per barrel.

Meanwhile, the Land Transportation Franchising and Regulatory Board (LTFRB) has assuaged public utility jeepneys and buses they would be allowed to collect additional P1 on top of their present fare rates. There would be automatic increase should world price of oil breach $80 per barrel.

As economic statistics require, estimates or forecasts must contain allowances or margins for error due to unexpected or uncertain events – for example, in case of a supply chain disruption related to the effect or impact of any event such as the present emerging war crisis in the ME anew.

Thus, the government’s macroeconomic targets set earlier this year need to be adjusted again, especially in the on-going preparations for the proposed 2026 budget. Any changes will be decided by the Cabinet-level Development Budget Coordination Committee (DBCC).

The DBCC went back to the table last Monday to re-draw its original macroeconomic estimates and targets. During the Kapihan sa Manila Bay forum last week, Bureau of Internal Revenue (BIR) commissioner Romeo Lumagui did not dismiss the possibility of a revision to the agency’s P3.232-trillion tax collection target for 2025.

“It’s possible given the actual GDP (gross domestic product) growth,” Lumagui conceded. “Supposedly, our collection target is dependent on the economic growth of the country. Since GDP is not growing as projected, there should be a recalibration of the collection target, if we will follow [that],” Lumagui pointed out.

We are just beginning to feel the impact of global disruption due to the two-week old ME conflict. Let’s go back to praying.