Philippine Construction Market Insight

Outlook, Trends, and Key Developments | March 2026

Recent geopolitical developments have introduced new uncertainties into the outlook for construction costs. Escalating tensions involving the US, Israel, Iran, and neighboring states, have led to a surge in global oil prices and increased volatility in shipping and logistics markets. The potential disruption of key maritime routes most notably the Strait of Hormuz, through which a significant portion of global oil supply is transported, has raised concerns regarding fuel costs and transportation expenses.

While these developments originate outside the Philippines, the construction sector remains exposed to both direct and indirect impacts of global energy market movements. Direct effects are reflected in fuel and transportation costs, while indirect impacts are transmitted through regional supply chains and the production of energy-intensive materials such as steel, cement, glass, and asphalt. As a result, global disruptions can influence domestic construction costs, even if the impact is not immediately reflected in material prices.

	March 2026	April 2026	2026	2027
Inflation Estimate (in%)
Baseline (Pre-conflict forecast)	3.4	3.9	3.6	3.2
Scenario 1: USD 100 per barrel in March; above USD 80 until May	4.5 - 5.1	4.5 - 4.8	4.0 - 4.2	3.5 - 3.6
Scenario 2: USD 140 per barrel in March; above USD 80 until September	6.3 - 7.5	6.4 - 7.5	4.5 - 4.8	3.6 - 3.7

Source: DEPDev-NPPS Staff Estimates

Notes: The upper-end assumes that prices of imported goods other than fuel will also increase.

Figure 1 - Inflation Scenarios Estimated by DEPDev

The potential inflationary implications of these developments are illustrated in the figure above, which presents inflation scenarios prepared by the Department of Economy, Planning, and Development (DEPDev). Under the baseline pre-conflict forecast, inflation for 2026 was expected to average approximately 3.6%, moderating further to 3.2% in 2027, which broadly aligns with the Bangko Sentral ng Pilipinas’ target range of 2%–4%.

However, the scenarios indicate that sustained increases in global oil prices could materially affect inflation outcomes. In Scenario 1, where oil prices reach USD 100 per barrel in March and remain above USD 80 until May, inflation could increase to 4.0%–4.2% in 2026, before moderating to approximately 3.5%–3.6% in 2027.

Under a more severe Scenario 2, where oil prices reach USD 140 per barrel and remain elevated through September, inflation could reach as high as 4.5%–4.8% in 2026, with short-term spikes potentially reaching 6.3%–7.5% during early 2026.

These projections highlight the sensitivity of domestic inflation to global energy prices and illustrate the potential for short-term inflationary pressure should geopolitical tensions persist.

Applying the historical correlation between Consumer Price Index (CPI) and CMWPI, construction material inflation under the baseline scenario is projected at approximately 2.15% in 2026 and 1.91% in 2027. Under a sustained high-oil-price environment, this could rise to 2.87% and 3.17% respectively, representing a meaningful escalation in raw material procurement costs.

Separately, BSP estimates based on the Macroeconometric Model (MEM) present a graduated view of oil price sensitivity, showing that each USD 10 increment in sustained crude oil prices translates into progressively higher inflation outcomes through 2027, with the risk of inflation breaching 5% should oil prices average USD 110 per barrel.

Oil Price (US$/bb1)	CPI 2026	CPI 2027
70	3.7%	3.6%
80	4.1%	4.1%
90	4.3%	4.5%
100	4.6%	4.9%
110	4.8%	5.3%

Figure 2 - Projected Inflation Sensitivity to Rising Crude Oil Prices

Figure 3 - Comparison of yearly inflation rates of the CPI and CMWPI as reported by PSA

Historically, the Construction Material Wholesale Price Index (CMWPI) has exhibited smaller and less volatile inflationary movements compared with the broader CPI, reflecting the more stable pricing behaviour of core construction inputs relative to the wider basket of consumer goods and services.

Quantitatively, the CMWPI has exhibited a 59.81% correlation with the CPI over the same period, reflecting a meaningful but moderated relationship between broad consumer inflation and construction material pricing.

Construction material prices in the Philippines remain elevated compared with pre-pandemic levels, although the rate of increase has moderated significantly over the past two years. At the start of 2026, however, an uptick in price growth has been observed. The CMWPI registered 0.9% year-on-year growth in January and 1% in February, reflecting increases in selected commodities such as steel products, tinsmithry materials, and certain mechanical and electrical components. The significant spike in fuel prices that began in early March 2026 has begun to affect construction materials such as reinforcing steel, with quotations increasing from PHP 37/kg to approximately PHP 41–45/kg.

Reinforcing steel prices broadly follow the direction of fuel prices, particularly during periods of significant increases in global energy costs. This relationship reflects the energy-intensive nature of steel production, as well as the role of fuel in the transportation and distribution of construction materials.

However, reinforcing steel prices tend to exhibit smaller and more gradual movements compared with the higher volatility observed in fuel prices. While fuel prices experienced sharp fluctuations between 2021 and 2023, reinforcing steel prices increased more moderately and subsequently stabilised. This suggests that although energy costs influence construction material pricing, the magnitude of price changes in key construction inputs is typically moderated by broader supply and demand dynamics within the global steel market.

Figure 4 - Comparison of Price Indices of Reinforcing Steel and Fuels

As illustrated in Figure 4, reinforcing steel prices respond to movements in fuel costs, although with more gradual and moderated adjustments. This reflects how energy-driven cost pressures are transmitted into construction materials over time rather than immediately. While recent price movements highlight the sensitivity of the sector to global energy markets, the extent and duration of these impacts remain uncertain.

At this stage, a measured “watch and see” approach is advisable, particularly given the potential for short-term volatility to reverse. Close monitoring of fuel price trends, procurement conditions, and supply chain stability will be critical in determining whether current movements translate into sustained cost increases. Premature procurement or bulk purchasing decisions in response to short-term price movements may introduce additional risk, particularly if market conditions stabilise or reverse in the near term. In the interim, maintaining flexibility in procurement and cost planning will be important to manage potential near-term volatility.

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