English
Philippines: Peso forecast to further fall to 55:$1 in 2019
MANILA, Philippines — The peso is expected to further lose ground next year, settling at 55 against the dollar by end-2019 due to a widening current account deficit, said London-based Capital Economics.
The think tank said it expects the country’s current account deficit to widen to around 2.5 percent of gross domestic product next year.
“As such, we expect the peso to lose more ground against the US dollar, falling further five percent to 55 to the dollar by end-2019,” said Capital Economics in a research note late Friday.
The country’s trade deficit, the largest component of the current account deficit, widened to a record $4.2 billion in October.
Capital Economics sees the trade deficit continuing to widen next year as exports continue to be weak and importation of capital goods in support of the government’s infrastructure program remain strong.
“We think the trade deficit in the Philippines will continue to expand over the coming year, putting further downward pressure on the peso,” said the firm.
It noted that the trade deficit has been the main factor behind the shift in the country’s current account position, which has gone from a surplus to a small deficit.
The country’s trade deficit widened to $4.21 billion in October from $2.59 billion in the same month last year as the growth in imports continued to rapidly outpace exports, the Philippine Statistics Authority (PSA) reported.
More than half of the imports during the period were raw materials and intermediate goods as well as capital goods used as inputs for production.
The total external trade in goods in October reached $16.43 billion, reflecting an increase of 14 percent from $14.41 billion recorded in the comparative period last year.
Exports rose 3.3 percent to $6.11 billion from $5.91 billion last year but imports continued to grow at a much faster pace of 21.4 percent to $10.32 billion in October 2018 from $8.50 billion in October 2017.
Despite strengthening over the past two months, the local currency is still down over five percent against the dollar year-to-date, Capital Economics noted.
The peso closed at 52.6 to a dollar Friday.
Source: https://www.philstar.com/business/2018/12/17/1877545/peso-forecast-further-fall-551-2019#25vvOscywK7wuUyH.99