Peso to stay pressured as headwinds mount – ING

The Power of Peso Navigating Headwinds

As the Philippines navigates a complex economic landscape, the peso is expected to remain under pressure through 2026. According to ING Global Research's latest Asia FX Outlook, the local currency will likely trade at P58.50 this year and further weaken to P59 to the dollar by the end of 2026.

Economic Pressures Mount

The peso touched a record low of P59.13$1 in October, following disappointing 4.0% growth in the third quarter. The currency closed at P58.985$1 on Tuesday, down by two and a half centavos, due to persistent concerns over economic growth.

Downside Risks Persist

ING warns that downside risks to growth have increased, driven by sharp cuts in government spending following a corruption scandal. Gross domestic product growth slowed significantly to 4.0% in the third quarter, as government infrastructure spending plummeted by 26.2%.

Corruption's Economic Impact

Historical precedent suggests that heightened scrutiny after such scandals often triggers prolonged fiscal tightening, resulting in significant economic losses over the past two years.

External Pressures Contribute

External sector pressures are also affecting the peso, including US tariff adjustments and a rise in the Philippines' own tariff rate. However, J.P. Morgan's inclusion of the Philippines on its Index Watch-Positive list may unlock foreign demand for peso-denominated government bonds, improving liquidity.

A Beacon of Hope

This development could lead to improved external balances, allowing the Bangko Sentral ng Pilipinas (BSP) to maintain a less defensive stance. While this may keep the peso biased to the downside over the medium term, anticipated Fed easing could offer near-term support in the fourth quarter.

Adapting to Market Trends

As the peso continues to face pressure, it is crucial for investors and businesses to stay informed about market trends and adapt their strategies accordingly. By doing so, we can navigate these challenging times and emerge stronger in the future.

Conclusion

In conclusion, the peso is expected to remain weak through 2026 due to mounting downside risks to growth and persistent fiscal constraints. As external sector pressures continue to weigh on the currency, it is essential for investors and businesses to stay informed and prepared to adapt to changing circumstances. By doing so, we can navigate these headwinds and position ourselves for success in the years ahead.

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Edward Lance Arellano Lorilla

CEO / Co-Founder

Enjoy the little things in life. For one day, you may look back and realize they were the big things. Many of life's failures are people who did not realize how close they were to success when they gave up.