MANILA – Fitch Group think tank Fitch Solutions downgraded on Wednesday its outlook on the Philippine peso this year, given the uptick in inflation.
According to its latest Asia Monitor report, Fitch Solutions – formerly BMI Research – said it now expects the Philippine peso to trade at P52.50:$1 on average this year.
“The Philippine peso is looking both technically and fundamentally bearish in the near term, and we are revising our forecast for the unit to average P52.50/USD in 2018, from P51.90/USD previously,” the report read.
“Fundamentally, the peso remains vulnerable due to negative real interest rates as headline inflation (at 4.6 percent y-o-y in May) is significantly above the Bangko Sentral ng Pilipinas’ policy rate of 3.50 percent,” it added.
The Philippine peso opened Monday at P53.30:$1, bringing the year-to-date performance of the currency P3.57 weaker than the close of P49.810:$1 on Jan. 3, the first trading day of 2018.
Inflation clocked in at 5.7 percent in July, the fastest in at least five years, from 5.2 percent in June and 4.6 percent in May.
“Over the longer-term, we are neutral on the Philippine peso in spot terms against the US dollar, but note that the PHP will likely outperform in total return terms,” said Fitch.
“On the positive side, we expect large and stable remittance inflows (which account for more than 10 percent of GDP to provide support for the external account and the currency.”
Central bank data showed personal remittances grew by 2.8 year-to-date to $15.787 billion as of June. (GMA News)
