THE CONTINUING WAR in Iran against the combined forces of the United States and Israel has been causing global fuel and food prices soaring, severely affecting poorer countries like the Philippines, through higher transport and food costs which could push two million Filipinos to poverty.

The World Bank, in its recently-released Philippines’ Poverty and Equity Assessment report, said “the rise of global fuel prices associated with the 2026 Middle East conflict illustrates precisely this risk: higher transport and energy costs ripple into food prices and household budgets, with the potential to push nearly 2 million Filipinos into poverty.”

It said that nearly three in 10 Filipinos remain at risk of slipping into poverty, while an oil price spike linked to the Middle East conflict could push almost two million more below the poverty line, said the WB report quoted by Business World.

Although the poverty rate in the country has declined steadily, at an average of 7.7% per year since 2012, excluding the pandemic. It fell to 15.5% in 2023 based on the latest available data, the bank said.

The bank said it expects this to decline further to around 12.3% by 2028 if the pre-pandemic relationship between growth and poverty reduction holds. Even so, this would remain above the 8-9% target set under the Midterm Update of the Philippine Development Plan 2023-2028.

Despite the gains, the Washington-based multilateral funder said 27.7% of Filipinos remain vulnerable to falling into poverty. With a median income of only 28% above the poverty line, these families are highly exposed to shocks such as higher food and fuel prices, according to the report.

World Bank Senior Economist Liliana D. Sousa, however, said the estimate was based on a modeled scenario and may no longer materialize given government measures.

Elevated oil prices and dwindling reserves have pushed the government to place the country under a one-year state of national energy emergency, suspend excise taxes on liquefied petroleum gas and kerosene, and roll out targeted subsidies to the most vulnerable sectors.

Sousa said that helping the poor and vulnerable households is critical as three out of five children live within these households.

Hardest Hit Sector

“What our analysis shows is really it is the poor and vulnerable that are getting hit hardest with these price shocks. And the reason is that they do not have that cushion, they are not able to absorb the income shock,” she said.

“That is why it makes sense to target interventions in moments of shocks to those households that are especially vulnerable to these shocks,” she added.

The multilateral lender also cited the country’s exposure to climate-related hazards as a major challenge to poverty eradication efforts. According to the report, 61% of the population is at high risk from tropical cyclones.

“Cyclone losses amount to about 1.2% of gross domestic product each year and could rise sharply without adaptation,” the World Bank said. “Disasters disrupt schooling and work, damage assets, and worsen nutrition.”

Meanwhile, 32.9% of Filipinos belong to the emerging middle class, which still faces a 10% risk of slipping back into poverty. These are Filipinos living on $6.50-$11.70 per day at 2021 international prices.

About a quarter of Filipinos, or 23.8%, are securely middle class or high income, defined as those living on more than $11.70 a day.

“The real barrier here moving from the emerging middle class to the secure (middle class) is a question of more higher-paying jobs,” said Sousa.

Still The Laggard

Despite its expected transition to upper middle-income status, the Philippines continues to lag regional peers on poverty reduction.

Using the upper middle-income country (UMIC) poverty line of $8.30 a day at 2021 international prices, 58.7% of Filipinos are considered poor, compared with 33.8% in regional peers and 29.4% across upper middle-income economies.

“This poverty rate remains high relative to countries with similar levels of per capita output, both lower middle-income and UMIC,” it said.

The Philippines is seeking to attain UMIC status in 2026. The World Bank classifies the Philippines as a lower middle-income country with a gross national income per capita of $4,470, just $26 below the UMIC classification of $4,496-$13,935.

Necessary Reforms 

Despite recent gains, the World Bank said urgent reforms are needed if the Philippines wants to achieve its Ambisyon Natin 2040 goal of eradicating poverty.

“The Philippines is crossing into upper middle-income status… And this report shows that the country’s own vision — Ambisyon Natin 2040, a prosperous, predominantly middle-class society where no one is poor — is well within reach,” said World Bank Division Director for the Philippines Zafer Mustafaoğlu.

According to the World Bank report, the poverty incidence would decline to 6% and the secure middle class would increase to 43% under a business as usual scenario where current policies continue and growth and employment follow existing trends.

Under a comprehensive reform scenario where growth and job creation policies are paired with a focused equity and resilience agenda, the poverty rate could drop to 2.9% while the secure middle class could increase to 55%.

“Given the high concentration of people just above the poverty line and the country’s high prevalence of shocks, progress can be easily reversed,” the World Bank said.

“Achieving the poverty target requires faster income growth for the poorest and improved resilience,” it added.

The report said labor market gains slowed in 2025 and 2026 amid last year’s corruption scandal and elevated oil prices stemming from the Middle East conflict.

“Gains slowed due to job losses in manufacturing and construction linked to disruptions in public infrastructure spending following the investigation of flood control irregularities and, more recently, the 2026 oil price shock,” it said.

In 2025, the unemployment rate averaged 4.2%, equivalent to 2.14 million Filipinos, the highest annual average since 2023. Meanwhile, the unemployment rate rose to 5% in March from 3.9% in the same month a year ago.

Mustafaoğlu said that the difference between the Philippines of today and the Philippines of 2040 comes down to creating more quality jobs, strengthening social protection and resilience against shocks, and improving frontline public services.

“These are specific, evidence-based reforms that the Philippines has both the capacity and the track record to pursue.”