Peso may hit 62 level as Middle East conflict fans inflation—MUFG
MUFG forecasts the Philippine peso could weaken to 62 per dollar in 2026 due to inflation pressures and Middle East conflict spillovers, raising its inflation outlook to 6% under base-case scenarios. The central bank is expected to hike interest rates further to 5.25% amid economic strain from fiscal tightening and a flood control project scandal.
MUFG expects the Philippine peso to trade between 60.50 and 61.50 against the US dollar in 2026 but warns it could slip past 62 per dollar under heightened risks. The financial services group cited regional inflationary pressures, including crude oil import dependence and Middle East conflict spillovers, as key vulnerabilities for the economy. Under its base case, MUFG raised its 2026 inflation forecast to 6%, driven by oil price assumptions, food price hikes, and potential Super El Niño effects. The Bangko Sentral ng Pilipinas (BSP) is anticipated to raise benchmark interest rates by 75 basis points early next year, lifting the policy rate to 5.25%. Economic growth is projected to slow to 3.5% in 2026, with government spending improvements potentially offset by delayed inflation impacts and higher borrowing costs. MUFG also highlighted unrelated domestic issues like fiscal tightening and a flood control project scandal as exacerbating economic strain. In severe scenarios, inflation could surge to 7.5% or even 10%, risking a recession and forcing the BSP toward further tightening. The bank warned that supply shortages and extreme inflation would decelerate growth significantly, worsening economic conditions.
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