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Philippines: Peso to end year at P48.40 vs dollar – ANZ Research
An Australia-based research body sees a stable Philippine peso for the rest of the year, but warned that the currency may weaken once domestic demand picks up next year.
In a report on Wednesday, ANZ Research projected the local unit to end 2020 at P48.40:$1, stronger than its P50.63:$1 finish in 2019. The peso is currently trading within the $48-to-the-dollar territory.
The peso’s performance “this year is driven by the sharp improvement in its external balance,” it said.
Latest data from the Bangko Sentral ng Pilipinas (BSP) showed that the country’s balance of payments posted a surplus of $4.11 billion in the first seven months of the year, but it’s still smaller than the $5.03-billion surplus in the same period in 2019.
This was partly attributed to the country’s trade deficit, which narrowed by 48.1 percent to $10.60 billion in the first six months of 2020 from $20.42 billion year-on-year.
ANZ Research also said an acute compression in local demand had translated into substantial reductions in imports.
“We expect this trend to persist for longer, since a meaningful rebound in domestic demand and remittance inflows is not envisaged until early next year,” it added.
The imminent upturn in electronics exports is also likely be balanced out by enhanced fiscal delivery for the rest of 2020.
ANZ Research said the local currency might continue to benefit from high real yields, given that the BSP is likely to pause on cutting policy rates in the foreseeable future.
At its last rate-setting meeting, the country’s monetary authorities kept the central bank’s overnight borrowing, lending and deposit rates at 2.25 percent, 1.75 percent and 2.75 percent, respectively.
“However, some weakness is expected when domestic demand gathers momentum in 2021,” ANZ Research said.
Next year, it expects the Philippine economy to rebound with an 8.4-percent expansion of its gross domestic product from its forecast of a 9.1-percent contraction this year.
Source: https://www.manilatimes.net/2020/09/24/business/business-top/peso-to-end-year-at-p48-40-vs-dollar-anz-research/771350/