[In This Economy] The peso is now at P60 to the greenback. Now what?

The peso has lastly breached P60 to the greenback. It is a historic first, nevertheless it’s not precisely stunning.

For weeks, the Bangko Sentral ng Pilipinas (BSP) had been promoting {dollars} from its reserves to maintain the trade charge from crossing this threshold. However like King Canute, the BSP can maintain again the waves solely to an extent. When underlying pressures persist, no quantity of intervention can forestall the inevitable.

Earlier than we panic, it’s price asking: what precisely modified between P59.90/USD and P60.10/USD? The sincere reply is: not a lot.

Greater than something, the P60 mark is extra a psychological barrier. Markets, like individuals, fixate on spherical numbers. Merchants watch them, headlines are written about them, and politicians scramble to react. However from a purely financial standpoint, there may be nothing essentially completely different concerning the trade charge at P60/USD versus P59/USD. The trade charge is a steady variable and never a cliff edge.

That stated, the forces pushing the peso down are actual and price understanding.

Why the peso is weakening

For those who didn’t know but, the Philippines operates beneath a floating trade charge regime. The peso-dollar charge is basically decided by provide and demand, in a lot the identical means we let the value of gasoline and diesel be decided by provide and demand.

The BSP often intervenes to easy extreme volatility within the trade charge, nevertheless it doesn’t (and mustn’t) defend a particular trade charge degree. Doing so could be enormously pricey (the BSP should shell out billions of {dollars}) and finally futile if underlying pressures to depreciate are too robust.

So what’s driving the depreciation? There’s a confluence of forces at play.

First, the US greenback has been robust globally amid tight monetary circumstances, and however the battle it began within the Center East. The greenback is now seen as a secure haven asset, particularly for the reason that US is perceived to climate the oil value shock being a serious oil producer. The truth is, since 2018, the US has been the largest crude oil producer on the planet, surpassing Saudi Arabia and Russia.

With dollar-denominated belongings are extra enticing to buyers worldwide, capital flows towards the US, and currencies just like the peso weaken in consequence. This isn’t distinctive to the Philippines; many different currencies have been beneath stress. The Korean received, for example, simply fell to a 17-year low in opposition to the greenback.

Second, the continued Center East battle has despatched oil costs surging, and the Philippines imports practically all of its crude oil. Increased oil costs imply greater demand for {dollars} to pay for these imports, which places further downward stress on the peso. The timing may hardly be worse, particularly for a rustic that chronically imports greater than it exports, as a result of this example creates a structural demand for international foreign money that weighs on the trade charge over time.

These forces reinforce one another. A robust greenback, costly oil, and a commerce deficit all push in the identical route. The BSP’s dollar-selling can sluggish the slide, however it may do little (if something) to reverse it.

Winners, losers, and the inflation query

A weaker peso will not be mechanically unhealthy information for everybody. In precept, it helps our exporters: when the peso depreciates, Philippine items and providers grow to be cheaper within the eyes of international consumers. The IT–BPM sector, which earns in {dollars}, advantages. Abroad Filipino employees sending cash dwelling see their remittances stretch additional in peso phrases.

However within the present context, I think the losers far outnumber the winners. A weak peso makes imports costlier, and we’re a closely import-dependent financial system. Every little thing from gasoline to electronics to uncooked supplies for manufacturing will get costlier when the peso falls. For peculiar customers, this implies greater costs on the pump, on the grocery, on electrical energy payments, on journey reserving websites, and on on-line purchasing platforms.

Inflation was already heading within the flawed route even earlier than the peso’s newest slide. Client costs rose 2.4% in February 2026 in comparison with final 12 months, and we should always anticipate a continued spike in inflation from March 2026 onward.

The mix of surging oil costs and a weakening peso is a double-whammy that can feed straight into greater client costs within the coming weeks and months.

Weak peso, weak financial system?

Typical knowledge dictates {that a} weak foreign money means a weak financial system. That’s plainly flawed.

Some nations with robust export sectors really profit from a weaker foreign money. Within the mid-2000s, China was accused of intentionally maintaining the yuan undervalued for exactly this cause.

However within the present Philippine context, the peso’s weak point appears to be coinciding with broader indicators of financial fragility. Final 12 months, development faltered to a mere 4.4%. Inflation is now beginning to creep up. The fiscal deficit stays extensive. Client and enterprise confidence are shaky.

In brief, the peso’s depreciation will not be occurring in a vacuum. It’s half of a bigger image of an financial system beneath stress from a number of instructions.

That is what makes the present state of affairs completely different from a run-of-the-mill foreign money fluctuation. The peso is weak at a time when the financial system can least afford it. Increased import prices will inevitably squeeze family budgets which are already strained. Increased inflation will stress the BSP into tightening financial coverage, which may additional dampen development. And a wider commerce deficit, exacerbated by costlier oil imports, will put much more stress on the peso going ahead.

What to look at for

The BSP now faces a tough balancing act. It must sign to the Filipino public that it’s on prime of the inflation state of affairs, however aggressive tightening (elevating rates of interest an excessive amount of) within the face of a supply-driven shock dangers deepening the financial slowdown.

As I argued in my earlier column, the correct method is a measured response: maintain charges or alter modestly, talk clearly, and keep away from overreacting to headline numbers which are being pushed by exterior shocks relatively than home overheating.

For the Marcos administration, the peso’s breach of P60 ought to function a reminder that macroeconomic administration requires greater than press conferences, emergency proposals, Band-Support options, and populist measures (like adjusting our thermostats, chopping excise taxes, or increasing Libreng Sakay). The underlying vulnerabilities, together with our oil import dependence, our commerce deficits, our inadequate funding in home vitality and productive capability, are deeply structural and received’t be fastened in a single day.

Within the meantime, P60 is only a quantity. Don’t let this spherical quantity panic you. The actual query is whether or not the forces driving the peso down are momentary or persistent — and proper now, the proof suggests they’re not going away anytime quickly. Brace for a tough experience for the remainder of 2026. – Rappler.com

Dr. JC Punongbayan is an assistant professor on the UP College of Economics and the creator of False Nostalgia: The Marcos “Golden Age” Myths and The right way to Debunk Them. In 2024, he obtained The Excellent Younger Males (TOYM) Award for economics. Comply with him on Instagram (@jcpunongbayan).

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