Peso weakens to 51.08 to $1

The peso yesterday shed 10 centavos to finally breach the 51:$1 level and close at 51.08.

It was an almost 11-year low for the peso, the weakest since Aug. 28, 2006’s close of 51.21 to $1.

At the Philippine Dealing System, the peso reached an intraday high of 50.90 after opening at 50.95.

The total volume traded fell to $291.5 million from $690.1 million last Friday.

The peso is expected to remain the worst performing currency in the region until yearend as it bears the brunt of “intensifying” imbalances in the economy caused by robust growth in recent years, the research arm of banking giant ANZ said.

“The Philippine economy has undergone a structural improvement in the last decade. Potential growth is around 6.5 percent currently, more than double what it was during the 1990s. However, the recent period of strong growth has resulted in the buildup of imbalances in the economy, which in our view are intensifying,” ANZ Research economists Sanjay Mathur and Eugenia F. Victorino said in a report titled “Philippines Insight: Intensifying Imbalance.”

ANZ said its view of intensifying imbalances was based on the performance of the following three interrelated indicators: Rising credit intensity; persistently high exposure to the real estate sector alongside rising property prices, and deterioration in the external position.

“Credit has been growing by double-digits since 2011 albeit with considerable volatility. As a consequence, the credit impulse measured by the ratio of the absolute annual change in credit to nominal GDP [gross domestic product] has increased at a rapid clip. Barring a brief dip in 2014, the increase has been continuous,” ANZ noted.

“We also note that the annual increase in the credit-to-GDP ratio in the Philippines has frequently hit 3 percentage points, a level that calls for vigilance, according to the International Monetary Fund’s assessment of financial stability,” ANZ added.

ANZ was also worried about the elevated lending to the real estate sector, which for ANZ showed that “a leveraged cycle of property price expansion has taken hold in the Philippines.”

“Credit to the real estate sector, though still within the prescribed limit of 20 percent of overall lending, has been outpacing that to other sectors. There appears to have been some deceleration recently but that is largely a result of a high base effect rather than a genuine slowdown,” ANZ said.

Also, ANZ was concerned about the current account deficit as imports outpace exports amid the need for more capital goods to build more infrastructure, including a flurry of residential projects, amid strong demand and investment. —BEN O. DE VERA