Peso Slump Predicted to Worsen Amid Oil Price Shock

The Philippine peso has fallen significantly this year, making it the worst-performing currency in Asia. Despite its emerging-market peers advancing against the US dollar, the peso dropped by 6.2% in 2026 so far. Strategists at JPMorgan Chase and Bank of America see the currency extending its decline to as low as 65 per greenback by the middle of next year.

The peso's weakness is attributed to a combination of factors, including a structural balance-of-payments deficit from weak exports relative to strong import demand, risk-off sentiment favoring the dollar, softer domestic sentiment, and expectations of further peso depreciation.

Foreign reserves have dwindled due to the country's reliance on oil imports, which has led to a widening trade deficit. The economy expanded at a slower-than-expected 2.3% in the second quarter, compared to India's 7.8% and Indonesia's 5.3%. Consumer prices rose 6.1% in August, above the BSP's 3% target.

Analysts said that while a seasonal pickup in fourth-quarter remittances may provide some cushion to the peso, it is not enough to reverse the trend. The government is rethinking its plan to sell five-year jumbo bonds due to the weak peso and rising interest rates.