The peso is expected to be resilient this year, averaging 51.7 against the greenback despite the volatility in global financial markets caused by the spread of coronavirus disease-2019, according to Fitch Solutions, a unit of Fitch Group.
“We at Fitch Solutions maintain our forecast for the Philippine peso spot rate to average P51.70/US$ in 2020, given the relative resilience of the peso to wider emerging market currency weakness,” Fitch Solutions said in a report Thursday.
“Indeed, in the short term, we expect the peso to depreciate only moderately as its fundamentals remain supportive amid uncertainty surrounding the Covid-19 outbreak,” it said.
The peso ended 2019 at 50.635 per dollar. The closing at the final trading day of 2019 was also P1.945 stronger compared to 52.58 a year ago.
The interagency Development Budget Coordinating Committee made a peso-dollar exchange rate assumption of 51 to 54 against the greenback from 2020 to 2022.
The peso reached its weakest level against the greenback in 2018 at 54.325 on Sept. 26 because of the lingering trade tensions between the world’s leading economic powerhouses the United States and China.
Meanwhile, Fitch Solutions said the Philippines’ current account deficit was expected to widen as a collapse in external demand outweighs the impact of softer domestic consumption amid the pandemic.
“The Philippine economy will be hit by the duel shock of a sharp drop in global demand and a concurrent tightening of global financing conditions. The coronavirus pandemic has resulted in partial to full lockdowns of key export markets for the Philippines, including the US, China and Japan, and a risk aversion move within global financial markets,” it said.
“Domestically, the Philippines too has had to impose lockdowns of Manila and the largest and most important economically island of Luzon. However, we expect a strong fiscal response in the Philippines focused on infrastructure investment and boasting consumption, which will mean a stronger recovery in import demand relative to exports, as tourism and travel have a delayed recovery,” it said.
“We now forecast a current account balance of -2.6 percent of GDP in 2020, from a previous forecast of -1.2 percent and a deficit of 0.1 percent in 2019,” Fitch Solutions said.