Compared to other currencies in Southeast Asia, the Philippine peso has appreciated and remained stable amid the coronavirus disease 2019 (COVID-19) pandemic, data from the Bangko Sentral ng Pilipinas (BSP) showed.
Yesterday, the Philippine currency closed at 48.63, 0.11 centavos lower than the previous day’s close of 48.52.
Before the government decided to put the country under various lockdown measures in March, the peso was at 51 to the dollar level.
While other currencies in the region exhibited depreciation, the peso has appreciated by 4.11 percent year-to-date, making it the best performing currency in the region.
Indonesia rupiah has depreciated by 5.51 percent, while Thailand baht has gone down by 4.32 percent.
Other currencies in Asia that appreciated include the Taiwan dollar by 2.57 percent, Japanese yen by 2.47 percent and the Chinese yuan by 1.17 percent.
Benjamin Diokno, BSP governor, said the peso’s strength can be attributed to “sound macroeconomic fundamentals characterized by a benign inflation environment, a strong and resilient banking system, prudent fiscal position and a sufficient level of international reserve buffer.”
“The market and investors continue to focus on the Philippines’ strong macroeconomic fundamentals. Going forward, the peso is anticipated to be broadly stable in line with the supply and demand conditions in the foreign exchange market as well as the continued soundness in the country’s macroeconomic fundamentals,” Diokno said.
He said in the period leading up to the pandemic, the Philippines also enjoyed a favorable ranking among peer emerging economies in terms of debt management and foreign exchange reserves.
“This has similarly contributed to the relative stability of the domestic currency. This is further strengthened by the government’s timely and decisive macroeconomic measures to mitigate the adverse impact of the pandemic,” Diokno said.
He added the country’s debt-to-gross domestic product ratio of 39.6 percent as of December 2019 was lower than those of neighboring emerging economies, while the country’s gross international reserves reached an all-time high level of $98.0 billion at end-July this year and is equivalent to 8.9 months’ worth of imports of goods and services and payments of primary income.
“The stability of the currency has helped temper inflationary pressures arising from increases in international prices of commodities, particularly crude oil, as well as agricultural food commodities. The prevailing benign inflation environment, in turn, allows continued policy space to support economic activity as needed,” Diokno said.
Another reason supporting the stellar performance of the peso, according to Diokno, is the affirmation of investment grade long-term sovereign credit ratings for the Philippines.
“The shock from the COVID-19 pandemic lowered sovereign credit ratings for Australia, Hong Kong, India, Indonesia, Japan, Malaysia, Sri Lanka, Thailand, Vietnam. Consensus among the credit rating agencies is that the worsening fallout from COVID-19 pandemic is expected to leave lasting scars through lower investment, an erosion of human capital, and fragmentation of global trade and supply linkages, and that any subsequent recovery will be protracted and uneven,” Diokno said.
“Even if the economic recession proves temporary, a few emerging trends are keeping credit rating agencies cautious of more rapid reversal of the deterioration in fiscal and debt metrics caused by the pandemic,” he added.
He stressed favorable investor sentiment over the economy’s fundamentals is expected to provide support to the currency amid weaker inflows coming from exports, tourism receipts and overseas Filipino remittances due to the COVID-19 pandemic.