Peso seen to weaken to P60:$1 with Trump measures — IBON Foundation

Economic think tank IBON Foundation expects the Philippine peso to weaken further and breach the P60:$1 level, with the trade deficit expected to widen further and remittances projected to decline as US President Donald Trump tightens restrictions on migrants.

According to IBON Foundation executive director Sonny Africa, there are more reasons for the peso to depreciate to P60:$1, a level that the currency has not seen before, than to strengthen.

“It’s always tricky to do mga forecast pero (but) we think the pressures for the peso depreciating to P60 (to a dollar) or more are there,” he told reporters at a briefing in Quezon City.

The Philippine peso is currently trading at the P58:$1 level. It closed Wednesday, January 22, at P58.51:$1. It last hit its record-low of P59:$1 on December 19, 2024.

“The trend has always been because of our increasing trade deficits, talagang [for sure] that’s a force of gravity against the peso eh,” he said, noting that the share of foreign trade to the global economy has declined to 58.5% in 2023 from 60.8% in the late 2000s.

Latest data from the Philippine Statistics Authority (PSA) shows that the country’s balance of trade in goods (BoT-G) posted a $4.767-billion deficit in November 2024, narrower than the $5.781-billion deficit in October, and the $4.769-billion deficit in November 2023.

A deficit indicates that the value of a country's imports exceeded export receipts, while a surplus indicates more export shipments than imports.

“You add to that nga weakening remittances, you add to that in all likelihood weakening foreign investment, unless may sobrang laking foreign loans to try to make up for the diminishing of foreign exchange earnings from remittances and from diminishing foreign investment, the Philippine government does not have the reserves to protect the peso,” Africa said.

Remittances

The Bangko Sentral ng Pilipinas (BSP) reported that cash remittances from overseas Filipinos fell to a six-month low of $2.808 billion in November 2024, down from the $3.079 billion in October and the lowest since the $2.583 billion in May last year.

Year-to-date cash remittances stood at $31.113 billion as of end-November, with the United States being the biggest source as it accounted for 40.9%. Africa expects this to decline even further, with Trump set to crack down on illegal migrants.

“Without any precision, walang duda (no doubt), the biggest source of overseas remittances is the US, so if the first wave of undocumented Filipinos are sent back to the Philippines, whatever they would have been remitting, wala na ‘yun (that is gone),” he said.

This comes as Trump earlier said he would impose severe limits on immigration, with a pledge to take on the largest deportation effort in the history of the United States and remove millions of immigrants.

Department of Migrant Workers (DMW) Secretary Hans Leo Cacdac estimates some 370,000 undocumented Filipino immigrants in the US. The DMW has since said it would assist those who could possibly be deported.

“We’d also add baka may (there may be a) second wave. The second wave is making it harder even for the legal migrants… It’s a slippery slope (cause) if you’re cracking down on migrants to protect American jobs, low-hanging fruit ang undocumented,” Africa said.

“‘Yung (That) logic na ‘yan can extend to tighter visa requirements for Filipinos and other nationalities so ano ‘yan, it’s a slippery slope I think,” he added.

For his part, BSP governor Eli Remolona Jr. has maintained that the central bank lets the market dictate the rate.

However, he earlier said that while the central bank does not have a target level for the exchange rate, it is still monitoring the passthrough effect.

“At some point, if the peso keeps depreciating, it begins to have an effect on inflation. For now the effect has been modest. It hasn’t been in our discussions,” he said in December, when the peso was in its record low. — RSJ, GMA Integrated News