Philippine peso slides
The Philippine peso tumbled further against the US dollar to hit Php57.20, based on official selling rate on Wednesday, September 27, 2023. Image Credit: Gulf News / Bloomberg

Manila: The Philippine peso continued its slide as it stood at Php57.20 vs $1 based on official selling rate data on Wednesday, September 27, 2023.

It was lower than the closing rate on Tuesday, at Php56.955, according to official data published by the Bangko Sentral ng Pilipinas (BSP), the country's central bank.

MUFG Global Markets Research suggests that the Philippine Peso is likely to experience further depreciation in the short term, due in part to the country's substantial current account deficit and the cautious stance of its central bank.

The value of the Philippine peso sharply weakened to an 18-year low of Php 56.37 to $1 in July 2022. Throughout that second quarter of 2022, the peso was the weakest in Southeast Asia, as the declining currency stoked public concern on the outlook of the Philippine economy.

This September 2023, one factor that contributes to the Asian currency's weakening is the strengthening of the US dollar as inflation cools, and the US Federal Reserve is seen my currency markets as being poised on slowing the pace of rate hikes.

Inflation rate

The Philippine economy is another factor, as the country saw a spike in inflation, the rate at which the prices of goods and services have risen.

Business World reported that based on first quarter (Q1) or January-March 2023 average inflation rate, the Philippines has the highest level of inflation in East Asia at 8.3 per cent.

In general, elevated inflation rates can erode the comparative worth of a currency, potentially reducing foreign investor confidence as they worry about their investments yielding lower real returns.

Additionally, external factors such as geopolitical uncertainties, natural disasters, or global crises like the COVID-19 pandemic can further compound these concerns.

The peso was up nearly 0.5% against the US currency until August 2023, driven in part by the willingness of the BSP to continue with its monetary tightening.

However, on September 5, 2023 the rate stood at Php57.121 against the greenback, and then tumbled further down to Php57.48 on September 20, 2023.

Not too worried

The country's economic managers, however, said they are not too worried about its persistent weakness, with the National Economic Development Authority (Neda) confident that the expected seasonal spike in remittances from Overseas Filipino Workers in the fourth quarter would see the peso gaining ground.

Still, Trading Economics estimates the dollar-peso pair to trade at 59.40 in 12 months’ time. Another forecast made by the Economy Forecast Agency, sees the USDPHP rate to hit Php60.18 in March 2024 against the greenback, a 6.3 per cent drop from September 27, 2023, but is expected to recover to Php55.59 by September 2024, before it slides to Php65.63 vs $1 by December 2025.