PH investments dip on strong dollar
Investment activity in the Philippines drops most sharply when the dollar strengthens and market volatility rises at the same time, according to a Bangko Sentral ng Pilipinas (BSP) study that underscores the need for stronger foreign-exchange (FX) risk monitoring and management—even among companies that earn in US dollars.
In a discussion paper published in April 2026, BSP researchers Hazel Parcon-Santos, Cristeta Bagsic, Carl Francis Maliwat, Jose Adlai Tancangco and Alyssa Cyrielle Villanueva found wide differences in how companies respond to global shocks, with the biggest pullbacks coming from those most exposed to foreign-currency debt and import dependence.
Drawing on different kinds of data, the authors said that the study offers a more comprehensive view of how external disturbances affect investment behavior. These effects are present both in the short and long run, they said.
Zooming in, manufacturing firms and exporters were identified as particularly vulnerable to dollar volatility due to significant foreign currency debt exposures.
Importers and domestically oriented firms with high FX liabilities also see sharper declines in investment, especially when dollar appreciation coincides with elevated volatility. When a stronger US dollar is accompanied by heightened volatility, the study notes, financial channels tend to outweigh trade channels, as borrowing costs rise and uncertainty increases.
“The results highlight that FX revenues alone do not fully insulate firms from global shocks,” the researchers said.
“Exchange rates serve as a key channel for transmitting global shocks because they adjust quickly, reflecting changes in relative returns and liquidity and affecting the incentives and constraints of every economic agent,” they added.
The BSP published the paper as the peso has come under sustained pressure from a stronger US dollar, which has gained amid a global oil shock following conflict involving the United States and Israel and Iran. Since the turmoil began, the peso has weakened to record lows and is now trading past the 61-per-dollar level.
The authors said their findings underscore the importance of managing FX debt even for US dollar earners.
“The results call for enhanced FX risk monitoring and management frameworks, even for firms that earn in US dollars; robust macrofinancial buffers to prevent global shocks from translating into broad-based investment contractions; and targeted liquidity support mechanisms for import-dependent firms during periods of acute dollar stress,” they added.
