A weak peso is a doubled-edged sword. It encourages exporters to produce more because of higher potential earnings from a ‘favorable’ exchange rate.
It is also a boon to business process outsourcing companies with overseas contracts denominated in foreign currencies.
But a weak local currency has its ugly side. It translates into higher cost of imports, especially of oil, fuels inflation and increases government pressure to raise transportation fares and wages.
The Philippine information technology-business process management (IT-BPM) industry, for one, is gaining short-term competitiveness from the peso’s depreciation. At the same time, however, it fears rising inflation and blanket wage hikes could erode the sector’s long-term advantage.
Proposed wage increases, while favorable or neutral to salaried employees, would create uncertainty and could affect investor projections and decisions.
Renewed Middle East tensions last week drove the immediate drop in the value of the peso. Brent crude rose 2.77 percent to $107.51 a barrel while West Texas Intermediate climbed 2.27 percent to $102.32 after Houthi forces attacked targets in Saudi Arabia and Iranian forces assaulted commercial vessels in the Persian Gulf, per a foreign wire report.
The Philippines imports nearly all of its oil requirements. Higher crude prices directly widen the country’s trade deficit and increase the demand for dollars among local importers.
The US dollar itself is strengthening, lowering the value of the peso and other foreign currencies. It is gathering strength as investors weighed the prospect of interest rate decisions from both the US Fed and the Bank of Japan.
One foreign exchange trader noted that the peso reached new lows after August’s US inflation data solidified views of a Fed rate hike. Against these hawkish expectations, the peso currency will likely remain weak.
The peso depreciation, to reiterate, has a significant impact on the economy because it will fuel inflation and slow down economic growth. It may boost our exporters but the weak currency creates a challenging environment characterized by higher costs and reduced production.
The Philippines can check the peso depreciation through more exports but that is easier said than done. We need to boost the economy and expand our export base-that means raising investments to generate more jobs and increase the purchasing power of our workers.
The administration of President Ferdinand Marcos Jr. has committed to speed up investments, strengthen skills training and help businesses expand, and hire more Filipinos after the July labor data showed mixed results.
The Philippine Statistics Authority’s July 2026 Labor Force Survey showed 49.2 million Filipinos were employed, an increase of about 3.2 million from last year. Private establishments added 582,000 wage and salary workers, and middle- and high-skilled occupations rose by a combined 2.6 million workers.
Unemployment, however, rose to 6 percent, with 3.14 million Filipinos out of work, an increase of 551,000 from a year earlier. More Filipinos are finding work but more are also entering the labor force as new graduates join the labor force.
Against this backdrop, the Marcos administration approved 46 special economic zones that are expected to draw P141.2 billion in investments and generate close to 189,000 jobs. Of these zones, 43 are outside Metro Manila, 29 in Luzon, 12 in the Visayas and five in Mindanao.
The government is also accelerating the Luzon Economic Corridor, which will link Subic, Clark, Manila and Batangas into a logistics, manufacturing and innovation hub. The mammoth railway project is projected to generate up to one million jobs.
A planned 1,600-hectare technology hub in New Clark City within the corridor is also expected to support semiconductor, advanced manufacturing and artificial intelligence industries, and create 130,000 high-quality jobs.
The training of more Filipinos for the new job positions should match the new investments. An expanded economic base and increased employment, hopefully, will add value to our currency and cancel out the effects of a stronger US dollar.