In a research assessment published on Monday, Fitch Solutions—the research arm of the Fitch Group—said the peso is likely to trade weaker this year, pushing them to revise their forecast of P47.50 to a dollar on average for 2021 down to P48.40 to a dollar.
“Investor appetite for the peso has been further dampened by rising oil prices, given the country’s net importer position, and a resurgence in Covid-19 cases in Manila in March. These headwinds are unlikely to abate in the near term, underscoring further peso depreciation,” Fitch Solutions said.
The think tank also warned that if the country’s Covid-19 cases continue to rise and restrictions become tighter in the coming weeks or months, foreign investor sentiment around the peso could weaken even further.
The peso weakness, according to the think tank, will not be isolated for this year. For 2022, Fitch Solutions forecasts the peso to weaken further to the P50.00 to a dollar territory on average.
“Strong credit growth and an expected loose fiscal stance should see the peso trade weaker. Indeed, we forecast the current account to fall into a deficit of 0.4 percent of GDP [gross domestic product] in 2022. Twin fiscal and current account deficits will contribute to a weaker outlook for the peso,” Fitch Solutions said.
Even then, the think tank also said the risk to this outlook is still on the downside, and is especially anchored on the government’s ability to control the spread and roll out the vaccines.
“This outlook remains at risk given the expected slow vaccine rollout in the Philippines. Issues around relatively low levels of trust in vaccines and the country’s largest populous pose challenges and ultimately could see the Philippines still implementing mobility restrictions in 2022, hampering economic activity,” Fitch Solutions said.
Image credits: Nonie Reyes
Read full article on BusinessMirror
