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Keisha Ta-Asan - The Philippine Star
June 28, 2025 | 12:00am
File phopto of a hand holding cash.
Philstar.com / Irra Lising
MANILA, Philippines — The peso remains fundamentally supported by structural inflows such as remittances, business process outsourcing (BPO) revenues and tourism receipts despite recent fluctuations in the foreign exchange market, according to the Bangko Sentral ng Pilipinas (BSP).
Speaking at the 191st Development Budget Coordination Committee (DBCC) press conference on Thursday, BSP Deputy Governor Zeno Ronald Abenoja said the outlook for the peso remains steady in the medium term, despite near-term volatility driven by global developments.
“In the near term, that will influence movements in the exchange rate,” he said, referring to the recent uptick in safe haven demand for the dollar.
“But over time, we can see that while the trade in goods is a deficit, the services sector continues to be firm,” Abenoja said.
According to Abenoja, remittances are expected to grow by about three percent annually, while BPO revenues are still likely to expand within the five to eight percent range over the medium term. Tourism receipts, meanwhile, are recovering strongly and are projected to rise at a high single-digit pace.
“These segments of inflows continue to grow, and that could support the peso,” Abenoja said.
“Historically, this is a consistent growing sector of foreign exchange earnings for the Philippines, an important portion of the current account of the balance of payments,” he added.
The local currency recently breached the 57 level against the greenback at the height of geopolitical tensions in the Middle East, prompting concerns over imported inflation. But the peso has bounced back to the 56 level this week, closing at ___ per dollar on Friday.
In a research note, ANZ Research said that the local currency has since pared back some of its losses.
“In June, oil prices spiked sharply due to the Middle East conflict and the peso reacted by depreciating past the 57.5 level against the dollar. However, the de-escalation in tensions later led to a drop in oil prices and the peso has also pared some of its losses,” it said.
ANZ said the effect of geopolitical shocks tends to weigh more heavily on the peso because the Philippines imports most of its energy requirements. Still, the risks to domestic inflation remain contained, as evidenced by the BSP’s decision to revise its 2025 inflation forecast lower at its most recent policy meeting.
The central bank expects headline inflation to hit an average of 1.6 percent this year, significantly lower than the previous forecast of 2.4 percent.
ANZ also said the peso has been overvalued for years, leading to a loss in competitiveness.
“Fair value analysis of the peso shows it has been persistently overvalued for the past several years which has led to loss of relative competitiveness compared to peers. As a result, the Philippines should consider a weaker exchange rate which will boost exports and attract investments,” it said.
Despite the peso’s vulnerability to global shocks, the BSP maintains that the country’s steady structural inflows are likely to temper depreciation pressures and support macroeconomic stability in the long term.
