‘Weak peso may hurt more than help Philippines economy’
A De La Salle University report warns that the weakening Philippine peso may worsen inflation and economic contraction rather than boost exports, as rising import costs and dollar-denominated trade offset potential gains. The peso is projected to hit 63.50 per dollar by August 2026, while inflation may peak at 8% and GDP growth could slow to 3.11% in 2026 due to energy costs and global tensions.
Economists at De La Salle University (DLSU) have warned that the peso’s continued depreciation beyond 60 per dollar may not benefit the Philippines economy as expected, with higher import costs and inflation likely to outweigh any export gains. The May 2026 report highlights that while exporters earn more in local currency, imported raw materials—especially for electronics—offset these benefits, leading to potential trade balance compression rather than expansion. DLSU predicts the peso will weaken further to 63.50 per dollar by August due to rising oil prices and negative real interest rates, before recovering to 55.80 by end-2028 as inflation eases. The report forecasts inflation peaking at 8% in August, driven by fuel price hikes and fertilizer supply disruptions, though it expects inflation to return to the Bangko Sentral ng Pilipinas’ 2–4% target by April 2027. The current account deficit is projected to widen to 5.17% of GDP in 2026, reflecting heavy reliance on imported petroleum and the weaker peso’s impact on dollar-denominated trade. The deficit is expected to narrow to 4.45% in 2027 and 3.77% in 2028. GDP growth for 2026 has been revised downward to 3.11% from 3.79%, citing risks from the Middle East conflict, higher energy costs, and potential monetary tightening. Growth is projected to improve to 3.93% in 2027 and 5.71% in 2028, assuming easing inflation and stable global conditions. DLSU’s analysis suggests the peso’s weakness is more likely to be inflationary and contractionary than expansionary, contradicting traditional economic expectations.
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