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Philippines says its economic strength will bolster weak peso
[MANILA] The Philippine government, seeking to reduce concerns about a sliding peso, said on Monday that the country's strong economy and attractiveness for investors will bolster the currency.
Economists say global political uncertainties and import-driven demand for dollars have caused the peso's recent fall.
The peso, Asia's worst performing currency this year, hovered slightly above Friday's 11-year low against the US dollar, weighed down by tension over North Korea and the Philippines' current account deficit.
"Short term volatility in the value of the peso is, at this point, simply market reactions to overseas developments to which currency traders and other players all over Asia are responding to day by day," Ernesto Abella, spokesman for President Rodrigo Duterte, told a briefing.
On Friday, the peso hit an 11-year low of 51.08 to the dollar. At 0400 GMT on Monday, it was trading between 50.90 and 50.99.
Abella predicted the peso would firm up due to the Philippines' "solid fundamentals, massive foreign reserves and increasing attractiveness to foreign investments as our infrastructure upgrades and expands." Alice Fulwood, associate economist at UBS in Singapore, said the "idiosyncratic weakness" of the peso relative to its peers can be attributed to the Philippines' shift to a current account deficit.
UBS has forecast the peso will be 51 to the dollar by year-end, and could hit 55 pesos by end-2018.
For the first time in 15 years, the Philippines is expecting a current account deficit this year. The government has forecast a deficit of $600 million, compared with 2016's $601 million surplus. In 2017's first half, imports of capital goods, mainly infrastructure-related, rose 5.5 percent to $14.44 billion.
On the external front, the anticipation of higher US interest rates eventually, and the tensions between the United States and North Korea are spurring some investors to flee from emerging markets to safer currencies, economists said.
Bangko Sentral ng Pilipinas Governor Nestor Espenilla on Sunday said he does not expect the peso "to do a freefall because our economic fundamentals now, unlike before, are solid and very strong." Philippine shares have been largely unaffected by the currency movement, with foreign investors still attracted to robust earnings growth of listed companies.