Manila: The Philippine peso weakened further down to Php53.69 vs the US dollar on Friday (June 17), as most Asian currencies slid amid fears of a possible recession as global central banks joined a chorus of outsized rate hikes in the wake of the US Federal Reserve’s biggest interest rate increase since 1994 earlier this week.
The peso has dropped nearly 11% over the last 12 months against the US dollar.
Philippine central bank forex data on Friday, showed the peso stood at 53.372 against the US dollar, from 48.128 on June 17, 2021.
Stock markets in the region also went through a meltdown with many set for their worst weekly performance since the early days of the pandemic in 2020.
Higher balance of payments deficit
Amid the peso’s decline and external risks, the Philippine central bank said Friday it expects the country’s current account balance to post deficits in 2022 and 2023 than previously projected.
The balance of payments (BOP), also known as the balance of international payments, is a statement of all transactions made between entities in one country and the rest of the world over a defined period.
A BOP deficit means the country imports more goods, services, and capital than it exports. By implication, it must borrow from other countries to pay for its imports.
The Bangko Sentral ng Pilipinas (BSP) has revised its BOP projections, with the current account deficit now seen hitting $19.1 billion, or 4.6 per cent of the gross domestic product in 2022.
This is more than deficit level forecast in March, when $16.3 billion deficit for this year — equivalent to 3.8 per cent of GDP — was initially projected.
The Philippine central monetary authority said the revisions to BOP projections were necessary as they took into account the build-up in “external risks”, ongoing global monetary policy tightening and lingering COVID-19 challenges.
The BSP cited the downgraded global growth outlook amid the Ukraine-Russia conflict and its impact on commodity prices, the slowdown in China, and the effect on capital flows on central bank policy tightening.
For 2023, the current account deficit is expected to reach $20.5 billion, or 4.4 per cent of GDP, wider than the previous projection of $17.1 billion, or 3.7 per cent of GDP.
There’s a positive outlook for inward remittances. Money sent home by overseas Filipino workers (OFW) are projected to jump by 4 per cent this year and in 2023, the BSP said.
Currency sent to loved one by Filipinos abroad form a crucial financial flow supporting the Philippine economy.
International reserves: $105 billion
The country’s gross international reserves (GIR), however, are forecast to drop to $105 billion by end-2022 and $106 billion by end-2023, lower than the March projections of $108 billion and $109 billion, respectively.
T-bond rates rise
The rate of the seven-year Treasury bond (T-bond) rose on Tuesday, with average rate of the debt paper increasing to 6.740 per cent from 6.428 percent previously.
The Bureau of Treasury’s (BTr) auction committee decided to alight rates with prevailing market rates and offered the debt paper for Php35 billion and the auction committee awarded Php19.551 billion. Total tenders reached Php62.296 billion.
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