The Finance Department expects the peso to remain stable this year, saying its strength in the first quarter tracked the movement of other currencies in Southeast Asia.
Finance Undersecretary Gil Beltran said in a report over the weekend the peso followed its peers in Southeast Asia in gaining strength against the US dollar in the first three months.
“Year-to-date, the peso appreciated modestly by 0.01 percent. The peso-dollar exchange also remains stable throughout the period, its coefficient of variation at 0.56 percent,” Beltran said.
Beltran said while the outlook for the peso remained tilted towards the downside owing to a growing current account deficit, which, in turn, is on account of increased importation of capital goods, the country’s external stance remained generally strong.
“First, it has ample buffers against heightened external headwinds; its gross international reserves remain high at $82.9 billion, equivalent to 7.3 months of imports of goods and services,” Beltran said.
“Second, it has prudently trimmed its external debt exposure. External debt-GDP ratio as of end-2018 remains comfortably low at 23.9 percent in 2018, significantly down from 59.7 percent in 2005,” he said.
The country’s trade deficit in 2018 ballooned 51 percent to $41.4 billion from $27.38 billion in 2017, as imports continued to outpace exports, the Philippine Statistics Authority data showed.
Imports last year grew 13 percent to $108.92 billion from $96.093 billion in 2017, while exports declined 1.77 percent to $67.487 billion from $68.712 billion in 2017.
Economists from First Metro Investment Corp. and University of Asia & the Pacific said the peso might remain strong for a limited period.
The economies said in the latest Market Call capital markets research that the US dollar had rebounded “amidst a robust economy and slightly higher interest rates that go with it, despite a likely delay and fewer Fed policy rate hikes than its previous projections.”
The peso reached its weakest level against the greenback in 2018 at 54.325 on Sept. 26 amid lingering trade tensions between the US and China.
The peso closed 2018 a bit stronger at 52.58 and opened 2019 at 52.515 on Jan. 2.
The peso returned to the 51-per-dollar level on Feb. 27, 2019, for the first time in nearly 10 months, driven by the good inflation forecasts coupled with the easing political tensions between the US and North Korea.
The peso stayed mostly within the 52-per-dollar level for the whole of March and ended the month at 52.5 against the greenback.
Bank of the Philippine Islands said in a report that as inflation decelerated, the local equity market might see strong foreign inflows which could support the peso in the near term.
Inflation averaged 5.2 percent in 2018. It peaked at a nine-year high of 6.7 percent in October before easing to 6 percent in November and 5.1 percent in December. Inflation eased to 4.4 percent in January, 3.8 percent in February and to a 15-month low of 3.3 percent in March.
This brought the average inflation rate in the first quarter to 3.8 percent, within the government’s target range of 2 percent to 4 percent.