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MANILA -The Philippine peso, now back above the 56:$1 exchange rate level, may further weaken to 57 against the greenback this year, according to DBS Group.
The peso closed at 56.03:$1 on May 16, gaining four centavos from 56.07:$1 a day earlier as the financial markets anticipated a pause in the Bangko Sentral ng Pilipinas’ (BSP) interest rate hike cycle.
Philip Wee, senior foreign exchange strategist at the Singapore-based group, said in a commentary that the peso-dollar exchange rate “should test the year’s high of 56.40:$1 again and eye the top of the National Economic and Development Authority’s (Neda) 53-57 range assumed for 2023 and 2024.”
The Philippine government itself sees depreciation as partly beneficial.
Improved competitiveness
“When the [peso] last hit 56:$1 on April 20, [Secretary Arsenio] Balisacan [of Neda] said the peso’s lower level could improve competitiveness for producers of local import substitutes and for exporters,” Wee said.
On April 24, the interagency Development Budget Coordination Committee (DBCC) said their peso-dollar exchange rate assumptions for 2023 were adjusted downwards to 53 to 57 per dollar.
‘Positive outturn’
The DBCC also said such a range was expected to be maintained until 2028.
Previously, as of December 2022, the DBCC’s assumption was for the exchange rate to range from 55 to 59 to a dollar in 2023, and from 53 to 57 to a dollar from 2024 through 2028.
“This positive outturn is attributed to the BSP’s policy normalization measures, as well as the expected inflows from improvements in tourism revenues and overseas Filipino workers’ remittances due to the reopening of the country’s economy,” the committee said. INQ
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