The Philippine peso is at its weakest value in more than 16 and a half years.
Yesterday, the local PH peso currency peaked at 55.15 against the US dollar posing threats to the country’s economic state.
Since the start of 2022, the peso’s depreciation of 7.4 percent is now the worst in Asean (Southeast Asian markets)said Michael Ricafort, Chief economist at Rizal Commercial Banking Corp.
Concerns continue to rise as the fast-paced change of the currency’s value shows a significant drop from only 51:$1 at the beginning of the year to 55:$1 this June.
With the quick depreciation of peso, analysts are now concerned that the Bangko Sentral ng Pilipinas (BSP) would resort to utilizing its foreign exchange reserves.
According to Emilio Neri Jr., lead economist at Bank of the Philippine Islands, the Philippines may soon pass by South Korean won, the weakest currency in Asia, if the PH peso keeps on plummeting.
Faster inflation is also one to watch as economists warn the public with higher inflation rates due to the constant depreciation of the peso.
BSP’s lack of intention to increase interest rates quickly is to be blamed, according to Nicholas Mapa, a senior Philippine economist at ING Bank, when the same situation also happened in 2018.
Crucially, selling off foreign exchange reserves to lean against overly excessive downward volatility in domestic currencies will remain a big tool in policymakers’ arsenal, and one that still has substantial ammo leftsaid Miguel Chanco, Pantheon Macroeconomics’ chief economist on Emerging Asia
Moreover, the BSP maintained that there is currently no need to increase interest rates as the PH and US are ‘facing different challenges’.