THE PHILIPPINE peso’s slide to back-to-back record lows is breathing new life into the country’s once-stagnant manufacturing sector, though curbing inflation and logistics costs will be crucial to sustaining the gains.
Aris Dacanay, senior Asean economist at HSBC, said the weaker currency could make Philippine exports more competitive in international markets, giving local manufacturers an edge over foreign rivals.
A depreciating peso could also encourage Filipino consumers to switch from more expensive imports to locally made goods. Meanwhile, overseas Filipino workers’ families receive more pesos for every dollar sent home, potentially supporting domestic spending.
Together, these forces are helping revive the country’s manufacturing sector, Dacanay said. He noted that 2026 marked the first time since 2018 that the Philippines had recorded meaningful and sustained growth in manufacturing.
“If economic theory goes as planned, this simultaneous expansion of export demand and contraction of import demand should, eventually, narrow the economy’s persistent trade deficit, making the weaker peso the bitter pill the economy needs,” he said.
The peso ended the previous trading week at 63.615 against the US dollar, setting a new record low. Analysts attributed such a weakness to prospects of higher interest rates in the United States and persistent inflationary pressures at home.
Last week, the Bangko Sentral ng Pilipinas (BSP) raised its policy rate by 50 basis points to 5.5 percent in a larger-than-expected move aimed at curbing stubbornly high inflation.
But the peso continued to weaken despite the aggressive rate increase. BSP Governor Eli Remolona Jr. reiterated that the central bank intervenes in the foreign exchange market only to temper excessive volatility that could fuel inflation.
He also stressed that the half-point rate hike was not intended to defend the peso.
Dacanay said the benefits of a weaker currency have limits, particularly without reforms to ease domestic price pressures.
While a depreciating peso can make locally produced goods cheaper for foreign buyers, it also raises the cost of imported raw materials and other inputs used by Philippine factories. Manufacturers could pass those higher costs on to consumers, fueling inflation driven by currency depreciation.
Domestic prices and logistics costs also matter, and the Philippines continues to struggle on both fronts, Dacanay said.
He pointed to measures such as reducing tariff and non-tariff barriers to trade and cracking down on market abuses by smugglers, hoarders and cartels as ways to lower costs and improve the competitiveness of local producers. (Ian Nicolas P. Cigaral © Philippine Daily Inquirer)
