With tough times ahead, austerity is the new buzzword.

Yes, Virginia, we are in belt-tightening mode. The legs of inflation have walked their way into every aspect of basic services, with no apparent de-escalation of hostilities on the horizon.

As an emerging economy, the Philippines is believed to be heavily affected and highly vulnerable to a macroeconomic crunch, triggered by the energy supply shock of the four-week-old Middle East conflict.

The extent of the impact, however, differs by nation and is contingent on each country's dependency on imported oil. I’m not entirely sure if this is reassuring, but recent studies indicate we’re actually better off than some of our regional peers.

For instance, Vietnam is described as highly sensitive to price shocks, with thin energy buffers of less than 20 days. Meanwhile, Thailand is reportedly facing extreme supply pressure, forcing government action to curb diesel prices and reduce energy consumption.

For the Philippines, the macroeconomic transmission story is sobering. The sustained uptick in energy prices pushes inflation, weakens the currency, reduces remittances, and eventually drags down economic activity.

That’s right, Virginia: a period of significant hardship is upon us. This comes even as a bill is signed into law empowering the President to suspend or reduce excise taxes on petroleum products—a major call to action that will hopefully ease the burden on consumers.

Cutting back on expenses, specifically fuel, actually has an upside: easing the otherwise chronic traffic on EDSA. With vehicle volume sliding by roughly 10 percent, travel times have improved. “It wasn't the DOTr (Department of Transportation) that addressed the gridlock on EDSA, but the conflict,” my friend Roland commented in jest after his commute was cut in half.

I certainly welcome the projected reduction in pump prices once the excise tax is temporarily suspended. The savings from a ₱10 per liter drop in gasoline could soften the blow of rising prices for other basic commodities.

But as an economic journalist, I believe the national government is in a difficult fiscal balancing act.

The removal of the oil excise tax—presumably starting in May—will dent the government’s income stream by ₱136 billion (broken down into ₱124.4 billion from excise taxes and ₱14.6 billion from VAT).

The estimated revenue loss, which could climb as high as ₱330 billion, largely depends on how soon the conflict is resolved. This intense uncertainty continues to violently influence the price of crude oil per barrel on the international market.

Furthermore, “ayuda” (social aid) is an additional expense that could put the government in an even more precarious fiscal position. Don’t get me wrong; I’m an empath and fully understand the financial difficulties we are facing.

However, as a student of finance, I see that this income loss could push the government to exceed its programmed borrowing of ₱2.68 trillion this year. That could derail aspirations to narrow the budget deficit as a percentage of GDP from 5.5 percent in 2025 to 5.3 percent and 4.8 percent in 2026 and 2027, respectively.

It reminds me of the Covid era. Statistics show the Duterte administration added ₱6.84 trillion in debt due to the pandemic, surpassing the combined borrowings of all previous administrations since Marcos Sr.

We can draw lessons from the pandemic when the economy was at a virtual standstill due to the lockdown. At this point, the keyword is survival. The longer the conflict lasts, the broader the collateral damage becomes.

For now, the situation calls for belt-tightening. No frills in our spending patterns—just the essentials.