Weak peso exchange ‘to worsen’ this year

CEBU, Philippines — With the rebound in investment spending, economists expect the Philippine peso to settle within the P52 to P53 range against the US dollar in 2020.

According to Jun Neri, lead economist at the Bank of the Philippine Islands (BPI), the current P50-P51 exchange due to peso support from positive global development may only last in the short term.

He said that with the expected widening of the country’s current account deficit, the fundamentals still point to a depreciation trend for the peso in the medium term.

Neri added that a recovery in public and private sector investment spending may cause a significant increase in imports and dollar demand in 2020, which in turn could drive the depreciation of the peso.

Meanwhile, exports continued to struggle given the weak demand in developed economies and global trade uncertainties.

In particular, the growth electronic components and semiconductors slowed down in the fourth quarter in 2019.

The trade component of the gross domestic product had a positive contribution to total growth given the corresponding slowdown in imports.

On the other hand, exporters expect a six-percent revenue growth in 2020 on the back of electronic parts and mineral products and services exports.

“The signing by US President Donald Trump last week of the initial trade deal with China provides another growth impetus, particularly for electronics,” Philippine Exporters Confederation Inc. (Philexport) president Sergio Ortiz-Luis Jr. told reporters.

The deal between the world’s two largest economies covers expanding bilateral trade in various sectors such as manufactured goods and services, further broadening market access and enhancing the protection of intellectual property rights.

The Philippine economy expanded by 6.4 percent in fourth quarter 2019, faster than the 6.3 percent growth that it recorded in the same quarter in 2018 and in line with market consensus.

Despite this, full year 2019 growth fell below the 6 percent level at 5.9 percent.

Speed bumps in 2019 derailed the economy’s growth momentum and prevented it from sustaining its seven-year streak of above 6 percent growth.