Tepid GDP growth might push peso toward 60:$1–MUFG
Weaker prospects for the Philippine peso are seen after the country’s economy underperformed last year, according to MUFG Research.
MUFG forecasts that the currency could gradually slide toward 60 per dollar and trail both G10 currencies and regional peers in Asia.
The warning follows a year of weak economic growth, which MUFG said could prompt the Bangko Sentral ng Pilipinas (BSP) to cut interest rates further.
That, in turn, might make local yields less attractive to foreign investors, all while a sweeping corruption scandal at home continues to weigh on business confidence and overall economic activity.
While MUFG expects the BSP to intervene in the foreign exchange market to slow the peso’s decline, the bank added that such efforts “will not change the fundamental trend.”
“The key driver behind our forecast change is the weaker-than-expected GDP (gross domestic product) print for the fourth quarter of 2025, which was driven by softer domestic demand,” the Japanese group said.
“We have as such also added in one more BSP rate cut into our profile, and now see BSP bringing the policy rate to 4 percent from 4.5 percent currently by the first half,” it added.
The assessment followed data showing that GDP expanded just 3 percent in the fourth quarter of 2025. This was the slowest pace in more than 14 years outside the pandemic. It is well below the median estimate of 4.2 percent in a poll of 14 economists by the Inquirer.
The weak outturn dragged the 2025 growth rate to 4.4 percent. This missed the government’s 5.5 percent to 6.5 percent target and fell short of the 4.8 percent consensus forecast.
Officials and analysts pointed to a mix of climate-related disruptions and the Marcos administration’s sweeping probe into anomalous flood control projects. The latter curbed government spending and weighed on business and consumer confidence.
Speaking to reporters a few days after the data release, BSP Gov. Eli Remolona Jr. said growth may recover in the second half of the year. He added the central bank would assess whether it could do more to spur demand.
Since its easing cycle began in August 2024, the BSP has lowered its benchmark policy rate by a total of two percentage points.
Already, domestic and external headwinds sent the peso falling to a record low of 59.46 last Jan. 15.
The BSP had said it would let market forces largely determine the exchange rate. It added that it would step in only if a prolonged slide threatens imported inflation as opposed to smoothening daily swings.
