Samarkand, UZBEKISTAN — Amid comparisons by some local firms claiming that the ongoing oil crisis triggered by the  conflict in the Middle East is hurting their business operations more severely than the Covid-19 pandemic, economists from the Asian Development Bank (ADB) said the broader Philippine economy is unlikely to suffer a shock as deep as the country’s worst post-war recession in 2020.

ADB chief economist Albert F. Park told a media briefing last Wednesday, May 6, that the Manila-based multilateral lender’s latest downgrade in regional growth forecasts remained far less severe than the economic collapse experienced during the pandemic.

“The perspective of private-sector [companies] could be different. But at the economy-wide level, we don’t think it would be the same level of shock,” Park said.

Park explained that the Covid-19 crisis disrupted both supply and demand simultaneously, unlike the current oil-driven shock stemming from geopolitical tensions due to the war in Iran.

At the height of the most stringent pandemic lockdowns, “people are not spending, people are not going out—so it’s hugely disruptive. And I don’t think we’re seeing that” now, he pointed out.

“There’s still quite a lot of robust domestic demand in many countries in the region,” he added.

Still, Park acknowledged that persistently elevated oil and food prices would create significant challenges for both households and businesses, especially firms heavily reliant on fuel inputs.

“This is certainly a headwind. Because if oil prices are high and later food prices are higher, then that’s more money [consumers] have to spend on those things—less money they have to spend on other things in the economy,” Park said.

He noted that such pressures could not only weaken consumer demand but also raise production costs for private firms.

For his part, ADB deputy chief economist Abdul Abiad said the ongoing oil crisis, “even under a more severe scenario,” would be unlikely to trigger a contraction comparable to the Philippines’ economic collapse at the onset of the Covid-19 pandemic, when annual GDP shrank by 9.5 percent in 2020.

In this current global oil price and supply crisis, “a lot of what will be felt will actually be on the inflation side rather than real activity,” he explained. Philippine inflation already surged to a 37-month high of 7.2 percent in April.

“It’s hard to say how this Middle East conflict would evolve—it could get worse, but it’s difficult to compare. But definitely, in terms of just the shock to real activity, you’re not going to get something as big as that Covid shock in 2020,” Abiad said.