The peso remains at risk of slipping past 60 to the dollar in 2026 amid “worsening sentiment,” though a recovery is expected once the current bout of weakness passes.
In its “Asia Strategy Outlook 2026” report released on December 4, Deutsche Bank said the peso could go through phases of depreciation and appreciation as the widening graft crackdown hit business confidence.
But a slowdown in government infrastructure spending as a result of the sweeping cleanup may offer some support later in the year by curbing dollar outflows tied to imports of construction materials, Deutsche Bank said.
Additional relief could come from sustained external financing for major infrastructure projects, many of them backed by official development assistance.
The Philippines’ potential inclusion in a key J.P. Morgan bond index is also seen to draw foreign capital and bolster the peso.
“We think [US dollar/Philippine peso] could first breach 60 on worsening sentiment, before settling closer to 57 to 58 as the current account deficit shrinks,” Deutsche Bank said.
The currency’s recent slide to record lows has unfolded against a backdrop of slowing growth and deepening political fallout.
After data showed the economy expanding by just 4 percent in the third quarter, its weakest pace in more than four years, President Marcos’s economic team conceded that official macroeconomic targets may need to be revised to reflect the strains created by the antigraft drive.
Flood control scandal
The scandal — which has implicated lawmakers, Cabinet members, government engineers and several private contractors — has been widely blamed for undermining business sentiment and complicating the central bank’s monetary easing campaign.
A weaker peso carries mixed consequences for the Philippines. It boosts the domestic value of remittances sent home by millions of overseas workers, supporting consumption in an economy that relies heavily on these cash transfers.
But it also risks driving up import costs and reigniting inflation. Prolonged depreciation, meanwhile, inflates the peso value of foreign debts held by the government and private firms.
The Bangko Sentral ng Pilipinas (BSP) has signaled it will allow market forces to determine the exchange rate, intervening only if a sustained downturn threatens to fuel imported inflation rather than to smooth out day-to-day volatility.
For now, BSP Governor Eli Remolona Jr. has kept the door open to a rate cut this month. (Ian Nicolas P. Cigaral © Philippine Daily Inquirer)
