The Philippine peso could weaken further until early 2027 and may fall to as low as P65 against the dollar, which could raise the cost of fuel, power, transportation, fertilizer, medicines and imported food inputs, such as wheat and feed grains, an economist warned.
When asked if the depreciation of the peso will be prolonged, Ateneo de Manila University (ADMU) economist Leonardo A. Lanzona Jr. told the BusinessMirror: ‘Yes; likely until early 2027.’
Lanzona said the pressures are external and structural: high oil prices, a strong dollar, and a widening import bill ‘driven by an economy that imports much of what it consumes.’
‘Until the country produces more of its own goods and food, the peso stays vulnerable to every global shock,’ he also told this newspaper.
On Wednesday, the Philippine peso slumped to a new record low of P63.361 against the dollar, 27 centavos weaker than its P63.09 finish against the greenback on Monday and Tuesday, data from the Bankers Association of the Philippines (BAP) showed.
Explaining the consequences of the prolonged slide of the local currency, Lanzona noted that sustained depreciation ‘raises the cost of fuel, power, transport, fertilizer, medicines, and imported food inputs such as wheat and feed grains.’
This, he said, erodes household purchasing power and squeezes firms with dollar debts.
‘Because so much of what Filipinos eat and use is imported, a weak peso passes quickly into everyday prices,’ Lanzona said.
Lanzona said the peso could fall within the range of P63.5 to P65.5 per dollar by early 2027, with P64 to P65 as the ‘most likely zone.’
‘The peso is under pressure from high oil prices, a strong dollar, and a wide import bill, and the BSP has signaled it will not use reserves to defend a specific level,’ he said.
This, he said, ‘skews risks’ toward further weakness, so P65 is ‘within reach.’
Lanzona said a rebound toward P62 to P63 would require a de-escalation in the Middle East and lower oil prices, which he said he considers ‘the less likely outcome.’
As to the speed and size of pass-through effect from a weak peso to domestic inflation, Lanzona explained to this newspaper: ‘Fuel prices adjust within one to two weeks; imported food and goods within three months, and broader inflation builds over two to four quarters.’
billboards do the job socmed
As a ‘rough rule of thumb,’ Lanzona shared his estimate, which pointed out that an official figure said, ‘A 10-percent depreciation adds about 1 to 2 percentage points to inflation over a year.’
However, he said the impact is larger now because oil is also high and inflation expectations are elevated, which is why he stressed that ‘import substitution matters.’
What the BSP can do
With the recent weakening of the local currency past the P63-per-dollar level, Lanzona said the BSP can keep rates ‘credible’ against the United States Federal Reserve and ‘smooth disorderly moves.’
However, he said the central bank ‘cannot reverse an oil and dollar shock with rates and reserves alone.’
‘The lasting remedy is production: invest in agriculture, food processing, and manufacturing so we import less,’ he said.
Moreover, Lanzona pointed out that remittances ‘will no longer be the solution, since they cannot close the trade gap, and about 2.4 million overseas workers are in the Middle East,’ which is the region at the center of the current shock.
‘Persistent’ demand
With the peso closing at P63.361 on Wednesday, a new historic low, John Paolo R. Rivera, Senior Research Fellow at Philippine Institute for Development Studies (PIDS), explained that this reflects ‘persistent’ dollar demand, global financial uncertainty, elevated oil prices and ‘growing concerns’ over the country’s external position, particularly the widening balance-of-payments (BOP) deficit.
‘Continued depreciation could raise import costs and add to inflationary pressures, especially for fuel, food and transportation,’ added Rivera.
Meanwhile, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC), explained that the peso already weakened by a total of +9.9 percent ‘since the war in the Middle East started on February 28, 2026.’
Among the factors behind the peso’s slump to a new record low was the Brent crude oil price which breached the $110-per-barrel mark recently, which he said was at five-month highs.
Jonathan L. Ravelas, senior adviser at Reyes Tacandong and Co., said ‘Fed hike risks are keeping USD/PHP elevated and market waiting for Bangko Sentral ng Pilipinas’ [BSP] policy meeting.’
‘Next resistance is 63.50,’ added Ravelas.
Within Wednesday’s trading session, the peso hit a new record intraday low of P63.373 against the dollar while its strongest point was at P63 against the greenback.