Financial flows to the country are expected to keep the local currency resilient, with the peso seen to end the year at 52.89 to a greenback.
The local currency ended 2018 at 52.58:$1.
In a report dated October 8, ING Bank Manila senior economist Nicholas Mapa said the local currency ended better than the US dollar last week on a week-on-week basis after corporate demand for the greenback weakened.
It said the peso mirrored the performance of its counterparts in the region due to expectations of further reduction in the Federal Reserve’s key rates, which has been slashed by 50 basis points so far, resulting in the current rate of between 1.75 percent and 2 percent.
The Fed is widely expected to deliver more cuts as the year ends given the weak outlook on the US economy and the global economy due to the impact of the trade issue between the US and China, among others.
“The peso was down initially on global growth fears but quickly bounced to track regional peers on Fed rate cut hopes,” Mapa said.
The peso has been trading at 51:$1 to 52:$1 since the start of the year, which Mapa said makes the local unit the third best-performing currency in the region.
He forecasts the trade deficit to be about $3.69 billion for August, higher than the $3.39 billion last July.
“Growth should rebound in 2H (second half). Consequently, ING expects financial flows to return to the Philippines, which will in turn help bolster the peso to close the year at 52.89,” he added.
Growth, as measured by gross domestic product, posted an average of 5.5 percent in the first half of the year, lower than the full-year target of 6 to 7 percent.
Economic managers traced this to the impact of the delay in the approval of this year’s national budget that hampered the government to spend based on the program.
They, however, believe that the output will recover in the second half of the year with the help of the catch-up spending program, particularly on infrastructure projects.