HSBC expects a more resilient Philippine peso this year compared to others in Southeast Asia due to a continued robust economy despite uncertainties from Trump’s policies.
“I don’t think it will reach P60 per US dollar. It will depreciate beyond 59,” HSBC economist for ASEAN Aris Dacanay told the media on Wednesday.
“To put it in context, all Asian currencies will depreciate but the Philippines will be the more resilient,” he added.
Dacanay projects a notable peso depreciation in the second quarter or after festive activities end.
The peso weakened to P58.395/dollar on Wednesday from P58.185/dollar on Tuesday based on data from the Bankers Association of the Philippines.
Dacany said the resilient peso for this year will be driven by three factors.
First, he said consumers in the country will continue to spend on cheaper goods from China, the world’s manufacturing powerhouse which will likely increase exports to Southeast Asia following possible higher tariffs from the US under the returning Trump administration.
“The Philippines is relatively more insulated from US tariff increases,” Dacanay said.
“Countries that are direct competitors of China will be affected due to a disinflationary effect. But the Philippines is not an exporter; we are consumers,” the economist added.
Dacanay added that Trump’s higher tariffs will not be applied to services, the Philippines’ major export.
Incoming US president Donald Trump promised to impose an additional 10 percent tariff on all imports to boost the production activities of American firms.
Second, Dacanay said the Bangko Sentral ng Pilipinas (BSP) has accumulated more dollar reserves compared to other central banks in Southeast Asia which can protect the Philippines from crises.
BSP reported the country’s gross international reserves, which also include gold, stood at $106.84 as of December 2024.
This level remained more than adequate, covering 7.5 months’ worth of imports of goods and 3.8 times the country’s short-term external debt based on residual maturity.
“The BSP has relatively more dollar reserves than other countries in the ASEAN and has been more active in managing the volatility of the currency,” Dacanay said.
Last, the economist said Philippine economic growth will remain robust due to low inflation and job opportunities, especially in the services sector.
Dacanay projects the average economic growth at 6.3 percent and inflation at 2.5 percent this year, partly due to the government’s lower rice tariff at 15 percent from 35 percent and the further influx of Chinese goods.
“We are imposing policies that directly cut prices and are opening our markets to investors,” he said.
Dacanay said a weaker peso will also boost the arrivals of foreign tourists who can buy local goods and services by exchanging fewer dollars for more pesos.
To support consumption, he said the BSP might consider easing its benchmark for interest rates to 5 percent by the third quarter, with a total of 75 basis points this year.
Despite worries about higher global inflation due to Trump’s trade policies, Dacanay said the US government might not enforce them in full.
“The US learned the shifts in the supply chain. When it increased the tariff on Chinese goods, a lot of Chinese foreign direct investments went to ASEAN and re-exported to the US,” he said.