PESO’S ADVANCE STOPS: From October 2018 to June 2021, the Philippine currency has advanced against the US dollar. For most of 2020, the Philippine peso was on the rise. This 2021, the previous year’s gains were shed off.
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DROP: From Php47.65 on October 27, 2020, the peso dropped to 50.7426 on July 19, 2021. The Philippine currency lost 4% in the second quarter. It slid further to 51.0291 on September 27, 2021, before settling at 50.49 on Friday (October 29, 2021, 8.21 UTC). Bloomberg expects the new support at Php51.81.
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REASONS FOR PESO'S SLIDE: There’s a confluence of factors, say economists: stronger dollar, higher liquidity in the Philippine monetary system, low demand from corporate and individual borrowers, coronavirus-driven lockdowns, and higher oil prices, which raises local demand for US dollars, among others. The US dollar surged to its highest in more than 10 months in September, tracking the surge in US Treasury yields.
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LIQUIDITY: Here’s one signal of higher liquidity, or cash available in the banking system. On July 29, the Philippine central bank (BSP) issued a resolution (No. 976) extending the zero-spread on its “peso rediscount loans” until the end of 2021. The facility allows banks to tap the facility to meet their temporary liquidity needs, as part of the government’s pandemic response measures. | A branch of UnionBank of the Philippines.
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REDISCOUNT: Due to the massive liquidity in the Philippine financial system, local banks continue to snub the BSPs “peso rediscount facility”. Rediscounting is a BSP credit facility extended to qualified banks with active rediscounting lines to meet their temporary liquidity needs. This is done by refinancing the loans they extend to clients using the eligible papers of end-user borrowers. | A teller attends to a customer at a BDO Unibank branch in the Philippines.
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OUTLOOK REVISED: On July 13, the Philippine peso dropped alongside local equities market after Fitch revised its outlook on the country’s economy to “negative” from “stable”, a trend seen since June 2021, which reflects investor sentiment amid Delta-driven challenges. The peso outlook is mainly contingent on pandemic response. The Philippine peso posted its biggest intra-day decline since 2013 as investors turned cautious ahead of a two-week strict lockdown. | Filipino mall-goers in Manila having their temperature checked at the main entrance.
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SHORT TERM: Fitch sees the peso to weaken “within a wide range over the near term”, due to the COVID-19 driven uncertainty and the pandemic-driven health situation. The ratings agency expects the Philippine currency to trade between Php49 to Php52 against the US dollar in the next three to six months. | Moderna and Sinovac shots being administered to Filipinos in a gym in the Philippines on Wednesday (October 27, 2021).
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RECOVERY: The Philippines’ COVID-19 infection numbers had seen a decline, with daily cases down to 3,000 on Tuesday and Wednesday, from more than 20,000 in September 2021. The tempo of coronavirus vaccinations is also gaining. Health authorities are now considering lowering restriction measures in the capital and surrounding provinces. Towards the end of the year, the Philippine currency is seen to make an uptick on expectations of higher remittances from overseas Filipino workers during the holiday season. | A vaccination drive in progress in the Philippines.
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REMITTANCES UP: The peso-dollar Exchange rate as of October 28, 2021. The Philippine currency will likely benefit from increased dollar inflow toward the country, especially in the latter part of the year. Personal remittances from migrant Filipinos hit $16.6 billion in the first half of 2021, slightly higher than the 2019 level or before the coronavirus pandemic.
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REPEAT PERFORMANCE? In December 2020, the peso appreciated against the US dollar by 5.4% in compared to its end-2019 level, making it one of the best-performers among the South-east Asian currencies. | Photo shows the main building of the Philippine central bank (BSP) along Roxas Boulevard in Manila.
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WHAT RECOVERY WOULD LOOK LIKE: On Wednesday (October 27), Socioeconomic Planning Secretary Karl Kendrick Chua said with rising vaccinations and a drop in new COVID cases and the National Capital Region (NCR) moving to a less restrictive alert level 2 (from currently level 3), it would improve gross value added (GVA) by Php3.6 billion per week and bring back initially 16,000 jobs. | A bird’s eye view of buildings under construction in Manila.
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VACCINATION OF MINORS: Vaccination of an estimated 12.7 million Filipino minors from ages 12 to 17 will start on November 3, the government’s vaccine czar, Carlito Galvez announced on October 28, 2021. The country’s chief economist estimates that at least Php8.3 billion would return to the economy — with 36,000 jobs created weekly — if COVID restrictions were further eased as Delta cases drop. | File photo shows Filipino students from St Scholastica’s College gesturing during a pre-pandemic ceremony.
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INTERNATIONAL RESERVES: The Philippines's gross international reserves (GIR) stood at $107.96 billion at the end of August 2021. This places the Asian country at 26th place globally in terms of GIR, which refers to pools of foreign currencies (US dollar value of foreign exchange, special drawing rights, reserve position in the IMF, and gold) held by the central bank to assist the international trade of goods and services. GIR is sufficient if it is enough to cover 3 months worth of imports.
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