The Philippine peso has dropped to historic lows, closing at 62.71 US cents on Friday amid a combination of domestic economic pressures and global geopolitical instability. The currency has shed approximately 6 percent of its value since the start of the year, breaking previous records set in July when it touched 61.847 per dollar.
Analysts point to several converging factors behind the slide. Before the conflict in the Middle East, the Philippines relied almost entirely on Gulf oil imports. When Iran effectively shut down the Strait of Hormuz in March, Manila declared a state of national emergency due to supply disruptions. As oil prices surged, local importers were forced to exchange more pesos for dollars to buy crude, further depreciating the local currency.
Simultaneously, rising yields on US Treasury bonds have prompted international investors to shift capital from emerging market currencies to safer dollar-denominated assets. Philip McNicholas, an Asia sovereign strategist at Robeco Singapore, noted that the peso’s vulnerability is compounded by the country’s large twin deficits in both fiscal and current accounts, alongside elevated inflation that the central bank is struggling to contain.
The impact on the Philippine economy is significant. While a weaker currency can boost exports and tourism, rapid depreciation is particularly damaging for energy-importing nations because it drives up the cost of imported goods. Inflation in the Philippines reached 6.1 percent in August, more than double the central bank’s target of around 3 percent and well above regional averages.
Ashwin Binwani, founder of Alpha Binwani Capital, warned that the peso could fall past the 63 mark if oil prices remain above $90 a barrel. He emphasized that the primary transmission mechanism for higher prices is through imported inputs, energy, and manufactured goods, creating an uneven strain on households.
President Ferdinand Marcos Jr.’s administration has pledged to enhance fiscal discipline and expects the Bangko Sentral ng Pilipinas to intervene to stabilize the currency. One key buffer is remittances, which accounted for roughly 8 to 9 percent of GDP last year. Filipino overseas workers sent home a record $35.63 billion in 2025, providing a substantial inflow of foreign currency, though experts caution that this is not a complete shield against external shocks.
Leave a Reply