CEBU CITY – The continuing conflict in the Middle East continues to weigh heavily against the Philippine economy, a financial expert said.

Federico “Fritz” Ocampo said the prolonged conflict will cause the Philippine economic growth to further slow down.

“The longer the conflict, and we are now on its third month, the more painful for the Philippines,” said Ocampo, BDO Unibank Inc. Senior Vice President and Department Head of Investment Management under the Trust and Investments Group.

During the BDO Business Talk held in Cebu on Tuesday, May 26, Ocampo said rising oil prices, inflation, and a weakening peso continue to hurt the Philippine economy.

“All the growth cylinders – household consumption, government spending, investments – lahat humina (all weakened). So, ang forecast namin (our forecast) 4.5 percent entering the year, ngayon (now it is only) three percent to 3.7 percent na lang,” he said.

Ocampo said Filipinos are feeling the impact of the Middle East crisis, noting that diesel prices surged by as much as 150 percent, reaching P154 per liter, while gasoline prices climbed to P100 per liter.

When commodity prices surge, household purchasing power drops, reducing consumer spending and slowing economic activity, he said. “When the prices of goods go up, your wallet shrinks. Therefore, you can spend less,” he said.

Ocampo added that the peso is expected to weaken further due to rising import costs that increase demand for US dollars.

“When the prices of oil, gasoline, and food that we buy increase, the import bill goes up. So, the companies that import these goods have to buy more dollars. As the demand for dollars rises, the peso weakens,” Ocampo said.

Ocampo added 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.

Fuel prices strongly influence mobility and behavior in cities, he said. "Did the traffic in Cebu decrease? Because in Metro Manila, the traffic disappeared. The traffic in Skyway disappeared,” he said.

Because of rising inflation, consumers are forced to shift to lower cost alternatives. “But those who ate cup noodles, the demand for cup noodles increased,” he said.

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

Higher interest rates, while necessary to control inflation, could further dampen borrowing, investments, and overall economic activity, Ocampo warned.