Mounting geopolitical tensions in the Middle East threaten to stifle remittance flows to the Philippines, a critical pillar of the domestic economy, as the region remains a primary destination for the country's overseas workforce.

James Villafuerte, Asian Development Bank (ADB) regional lead economist, warned that a prolonged conflict between Israel and Iran could disrupt the livelihoods of millions of Filipinos, potentially curbing the record-breaking capital inflows that bolster the nation’s consumption-led growth.

Villafuerte said that while volatile fuel prices pose an immediate strain on the local economy, the secondary risk lies in the displacement of overseas Filipinos workers (OFWs).

“For the Philippines, an additional risk lies in remittances and tourism, as we are heavily dependent on both. The disruption in air travel is affecting many Filipinos, particularly those in the Middle East,” Villafuerte said.

He noted that the Middle East ranks third among the destinations Filipinos choose for migration.

“About a fifth of Filipino migrants are in the Middle East. My concern is that if this situation is prolonged and Filipino workers there are affected, it could significantly impact remittances,” Villafuerte said.

Meanwhile, the Manila-based multilateral lender has priced in a modest slowdown in regional economic growth, particularly in the context of promptly containing the aggression between Israel and Iran.

“Our estimates for the region suggest that if the war ends relatively soon—within a month or even a couple of months—the impact on overall regional growth would likely be just a 0.1 percent reduction,” Albert Park, ADB chief economist, told reporters.

Remittances from OFs hit a record last year, buoyed by year-end bonuses and holiday spending that pushed annual inflows beyond the central bank’s official expectations.

According to the Bangko Sentral ng Pilipinas (BSP), total cash remittances in December 2025 hit a record high of $3.52 billion, pushing full-year cash remittances to an all-time high of $35.63 billion.

As per the ADB’s December 2025 outlook, Southeast Asian economies are expected to collectively expand by 4.4 percent, with the Philippines alone expected to grow 5.3 percent—a rebound of about one percentage point (ppt) from the 2025 growth slump of 4.4 percent.

“On the other hand, the impact on inflation could be more pronounced. Given the importance of energy in many consumers’ baskets in the region, even if the war ended today, we would likely see inflation rise this year by about half a percentage point compared to what it would have been without the conflict,” Park said.

ADB has projected regional inflation to clock in at 2.8 percent this year, one ppt faster than the 2025 average inflation rate of 1.8 percent. For the Philippines alone, ADB has forecast a price growth rate of three percent.

Park explained that if the conflict continues, it would have a greater impact on regional inflation. Still, he said this would remain under control for “most” economies in the region, citing the downward trend in pre-war inflation.

“Before this conflict, inflation had fallen to levels within the target range of most central banks, even dropping below pre-pandemic levels. So we are starting from a strong baseline,” Park said