Peso seen depreciating this year
CEBU, Philippines — The peso may see a moderate depreciation this year.
BPI lead economist Emilio Neri Jr. said that the weak outlook for global economic growth and expectations of a less aggressive policy tightening from the Fed puts less depreciation pressure on the peso.
The country’s prevailing high interest rate regime also makes the peso more attractive.
A stronger peso usually makes imports less costly but it also cuts the dollar value of export earnings and remittances from overseas Filipino workers.
But the Philippines is seeing a widening trade deficit, as imports continued to outpace its exports.
Neri noted that the widening trade deficit could result into the peso’s modest depreciation moving forward.
The economist expects the Bangko Sentral ng Pilipinas to intervene to moderately depreciate the currency.
This is to ensure, he noted, that the current account deficit does not widen too much.
In fact, he sees the peso returning the P54 to a dollar level as early as the second quarter.
The peso’s expected depreciation is anchored on the foreseen rate hike to be carried out by the US Fed and that global oil prices are projected to rise to $60 per barrel before the year ends. (FREEMAN)
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