Peso breaching P60 ‘not necessarily bad’ — BSP

Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona Jr. said the peso’s breach of the P60-per-dollar level amid the ongoing Middle East conflict may not necessarily be negative, noting potential benefits for the country’s external position.

At a Thursday press briefing — where the BSP announced it would keep interest rates steady despite rising inflation risks from surging oil prices — Remolona said the peso’s continued depreciation could help narrow the Philippines’ current account deficit and support export competitiveness.

“As you know, the peso has remained in the neighborhood at P60 to the dollar. So far, it hasn’t merited heavy intervention,” he said.

“We understand the weakness of the peso is not necessarily a bad thing. The peso, where it's going, seems to help with our current account deficit, seems to help with our exports, so it's not necessarily a bad thing.”

The peso has hit record lows multiple times since the United States became directly involved in the conflict three weeks ago, falling to an all-time low of P60.30 per dollar on March 23. As of press time, the currency was trading at around P60.23, hovering near record levels amid sustained dollar demand and elevated global oil prices.

A weaker peso has mixed effects on the economy. In the short term, it can widen the current account deficit as imports — particularly fuel — become more expensive in peso terms. Over time, however, higher import costs may dampen demand and encourage the use of local substitutes, potentially improving the external balance.

Remittances also provide a cushion, as a weaker peso increases the value of dollar inflows from overseas Filipino workers, helping offset higher import bills and stabilize the country’s external accounts.

On the export side, a weaker currency makes Philippine goods and services more competitive abroad. However, gains are partly constrained by the country’s reliance on imported inputs. Service exports, such as business process outsourcing (BPO) and tourism, tend to benefit more, as they earn in foreign currency without significant import dependence.

Remolona reiterated that the BSP typically intervenes in the foreign exchange market only during periods of excessive volatility, allowing the peso to be largely market-driven. However, he has previously signaled that the central bank remains ready to step in if weakness becomes disorderly.

Still, peso depreciation has immediate consequences for households. A weaker currency raises the cost of imports — including fuel, food and electricity inputs — fueling inflation and eroding purchasing power. While most Filipinos feel the impact, some sectors benefit, particularly remittance-receiving families and dollar-earning industries.

The inflationary impact has been exacerbated by the ongoing Middle East conflict, which has driven domestic fuel prices sharply higher. Despite these pressures, Remolona said the BSP would maintain its key policy rate at 4.25 percent, citing weak economic growth in 2025 and the limited effectiveness of monetary policy in addressing supply-driven inflation.

“As a data-driven central bank, we’ve been paying close attention to the fast changing and uncertain environment resulting from the conflict in the Middle East,” he said. “This inflation is driven by supply shocks, where the potency of monetary policy is limited.”