I may have to eat humble pie if the Philippine peso weakens to PhP 60 to a U.S. dollar or above for a long period this year 2026. I have been cocksure that “the Philippine peso will not be a ‘senior citizen’ any time this year.” I had predicted that the exchange rate will continue to stay at the PhP 59 to US$1 for the whole of this year, reasoning that the Central Bank has more than enough dollar reserves to protect the local currency from depreciating beyond what is considered a psychological barrier of PhP 60 to US $1. It is obvious that the barrier has been breached. The whole thing now hangs on how soon can President Trump de-escalate the Middle-Eastern war. If the war continues for more than a month more, we can expect the peso to trade within the 60 to 60.5 levels in the near term. Should there be a de-escalation of the war, the peso can quickly get back to below-60 level, as it has been doing in the last few days.

            Those who take a more pessimistic view of a continuing high price of oil above the $100 a barrel level point out that even if the war ceases soon and the Strait of Hormuz is once again open to traffic of all vessels, the destruction of petroleum-producing facilities has been so massive that it will take some time before the supply of oil to the world will return to normal. Even if the price of oil goes down below the $100 level, it can be expected to be in the high eighties or nineties for the whole of 2026. Filipino consumers should prepare for food inflation that can rise to as high as 6 % that will be the result of sustained high fuel prices, rising transport and fertilizer costs that can reduce the supply of basic food items. The Government should prepare for the worst case scenario (called the severe shock scenario) that could keep oil prices above the $100 per barrel level. In this case, food inflation can rise to as high as 6 to 8 %. This could happen if the Middle East conflict is prolonged leading to oil supply disruptions, and complicated by the peso weakening further. As a feature article that appeared in the March 27, 2026 issue of Financial Times headlined, “From Minnesota to Punjab, fertilizer costs are up and harvests are set to be hit due to halts in production and disruption to key shipping routes. This is particularly grave concern for the world’s poorer nations.”

            As of early 2026, Philippine food inflation is still at a relatively low 1.6 to 1.8 %, while overall inflation is at 2.2 to 2.4%, still within the BSP target. There is a high probability that food inflation could rise further because the Philippines imports about 90 to 98 % of its oil requirements. Increases in the price of fuels directly raise logistics costs (trucking and shipping), fishing costs, and cold storage and electricity costs. These can easily result in a domino effect on food prices. For example, a 20 % increase in oil prices alone could add about 0.8 percentage points to inflation. Very vulnerable are fertilizer and other farm costs. The Philippine Government is already preparing fertilizer subsidies and fuel aid to farmers. Especially critical are the prices of rice, corn and vegetable. Although the Central Bank can be expected to manage expertly as usual the foreign exchange to prevent it from depreciating much beyond the Php 60 to $ 1 level, consumers and businesses should prepare for possible second-round pressures from wage increases, higher electricity rates that affect food processing and transport fare hikes. There are, however, offsetting factors like good harvests of rice and corn, early arrival of rice imports and government moves to suspend fuel excise taxes, expand subsidies and lower rice tariffs.

            For scenario planning, both business and consumers can consider the “base case scenario” (most likely if oil supply stabilizes early at below $80 to $90). This would result in a mild food inflation of 2 to 4 %. Then there is the “moderate shock scenario” that could result in food inflation of 4 to 6 % driven by sustained high fuel prices, rising transport costs, and further increases in fertilizer costs. The Government should be ready with compensating measures for this increasingly plausible scenario given the ongoing energy crisis. Although unlikely, there should also be provisions for the “severe shock scenario” which could result from the price of oil staying above $100 per barrel for a longer period than one year. Food inflation will accelerate to 6 to 8 %, with overall inflation breaching the government target of 4%. This would happen if the Middle East conflict persists (similar to the Russia-Ukraine war), with supply disruptions worsening and the peso weakening further. It is always prudent to be prepared for the worst case scenario by being ready for drastic cuts in the use of energy and travel.

            The key insight from this scenario planning exercise is that food inflation in the Philippines today is less about agriculture and more about energy. If fuel prices normalize, food inflation stays manageable. If fuel prices stay elevated, food inflation accelerates quickly. Having said that, however, millions of households in the urban areas (already 60 per cent of the population) can do much to mitigate food inflation by converting whatever idle lands there are in their vicinity into vegetable and fruit gardens that can increase food supply, without a corresponding increase in transport costs since important items in the diet of every household need not be transported and are consumed in situ. More than ever, we should motivate the populations in urban areas to “plant, plant, plant” in whatever small plots of land to which they can have access.

This is the time to mobilize, not only especially the public elementary and high schools, but also households, to take more seriously whatever gardening they can do in the numerous vacant lots that are scattered all over our urban territories. Urban gardening addresses several human needs: it can be a way of physical exercise, a hobby that distracts the mind from the routine of daily work and an effective means of converting of making productive an idle economic resource. I can attest to all these benefits because I have been involved in gardening for the last fifty years of my life. In sum, since it is transport and not agriculture itself that matters most in this food crisis, growing the food right where the urban population is can be an effective response to food inflation. To be continued.