The peso remained firm and nearly steady from its 2019 year-end level despite the rising risks in the global economy heightened by the spread of the coronavirus disease 2019 and the collapse of global stock markets.
The Finance Department said in an economic bulletin that the peso as of April 15 ranked third among the three currencies in Southeast Asia that maintained their value against the US dollar since the start of the year.
“During the year, the peso appreciated by 0.04 percent relative to the US dollar, ranking third behind the Japanese yen which appreciated by 2.05 percent and Hong Kong dollar which appreciated by 1.28 percent. All the other currencies depreciated against the US dollar,” the agency said.
It said the peso-dollar exchange rate remained stable throughout the period, with a coefficient of variation of 0.26 percent which ranked first among 12 regional currencies. It was also lower than the 1.94 percent Asian average.
“The main reasons for the peso’s growing strength and stability are the country’s strong balance-of-payments position and rising gross international reserves,” the department said.
“Strong foreign exchange inflows from exports of services, remittances, income from investments abroad, direct foreign investments and foreign borrowing all contributed to the strong BOP position. These in turn boosted the confidence in the Philippine peso,” it said.
It said the exchange rate adjusted for the GDP price deflator is significantly correlated to the size of the BOP surplus relative to GDP and the size of the GIR relative to imports of goods and services.
The Philippines posted a balance of payments surplus of $7.844 billion in 2019, representing 2.2 percent of GDP, the highest since 2012.
Meanwhile, the gross international reserves rose to $88.2 billion as of end-February 2020, equivalent to 7.8 months of imports of goods and services. The GIR level was also 5.1 times the country’s short-term external debt.
“Strong macroeconomic fundamentals support the country’s financial position. The BOP surplus in 2019 was the highest in recent history. Manageable budget deficits and prompt adjustment of monetary settings in response to current developments help maintain investor confidence,” the Finance Department said.
Fitch Solutions, a unit of Fitch Group, said in a report the peso would continue to be resilient this year, averaging at 51.7 against the greenback despite the volatility in global financial markets caused by the spread of COVID-19.
“We at Fitch Solutions maintain our forecast for the Philippine peso spot rate to average P51.70 per US dollar in 2020, given the relative resilience of the peso to wider emerging market currency weakness,” Fitch Solutions said.
“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.