1 month ago
18
Upgrade to High-Speed Internet for only ₱1499/month!
Enjoy up to 100 Mbps fiber broadband, perfect for browsing, streaming, and gaming.
Visit Suniway.ph to learn
Emerging market (EM) currencies, including the Philippine peso, gained versus the United States (US) dollar in the aftermath of US President Donald Trump's tariff spree, according to the think tank Capital Economics.
"EM currencies have generally strengthened against the dollar since 'Liberation Day.' Those of some oil exporters have weakened though," Capital Economics research assistant Jack Oatley noted in an April 28 report.
Since Trump announced last April 2 the 10-percent baseline for all countries and higher reciprocal tariffs on trading partners with which the US has a trade deficit, the peso appreciated against the greenback by about one percent, Capital Economics data showed.
This extended the relative strength that the peso has been enjoying since the beginning of this year.
"We still expect a stronger US dollar and higher treasury yields in Trump's presidency. Fortunately, EM currency crisis risks are nearing a historic low," Capital Economics said.
The think tank still expects the peso to fall to the ₱62:$1 level this year.
Despite this, the peso is nonetheless among the least vulnerable to sharp currency falls, based on the Capital Economics' latest EM Currency Crisis Risk Indicator.
The Philippines sovereign debt also has among the lowest risk of default, according to the think tank's latest EM Sovereign Default Risk Indicator.
Also, the country's banking sector has a low risk of facing a crisis, the think tank's latest EM Banking Crisis Risk Indicator showed.
While paused for 90 days, Philippine imports into the US are poised to be slapped with 17-percent reciprocal tariff. The Philippines is nonetheless among the economies considered to be least impacted by a global trade war wrought by Trump's tariffs, given its domestic-oriented economy.
However, Capital Economics earlier warned that net importing countries like the Philippines should brace for a barrage of Chinese goods as China seeks alternative export markets to the US.
EM exports, including those of Philippine-made goods, "were faring well prior to Liberation Day," the think tank noted, citing that "some of this may reflect tariff front-running," or frontloading of exports before US tariffs take effect.
"US import tariffs have largely focused on China. For some EMs (such as India and Southeast Asia), this creates near-term opportunities to take US market share from China," Capital Economics said.
"But there will be offsetting effects if confidence has been hit. And EM commodity producers have to face lower prices," it added.
As previously reported, Capital Economics still expects the Philippines to lead EM growth this year, with a faster economic expansion than in 2024.
Capital Economics forecasts the Philippines' gross domestic product (GDP) to grow by six percent in 2025—at the lower end of the government's more ambitious six- to eight-percent target, after last year's below-expectations 5.7 percent.
This year's growth would be partly supported by downward inflation, as the think tank pointed to a year-on-year drop in the headline rate as of March.
It expects Philippine growth to further quicken to 6.5 percent next year and 6.3 percent in 2027.
Capital Economics had projected headline inflation to average 3.2 percent in 2025, 2.9 percent in 2026, and three percent in 2027—all within the government's targeted two- to four-percent range of annual price increases deemed conducive to economic growth.
As such, the think tank also expects the Bangko Sentral ng Pilipinas (BSP) to cut key interest rates by another 75 basis points (bps) for the rest of 2025, after this month's 25-bp reduction that lowered the policy rate to 5.5 percent.
