THE Philippine peso is expected to remain under pressure against the US dollar as rising oil prices ripple through the economy, potentially constraining monetary policy easing.
“In our scenario of sustained oil disruptions for a month, CPI (consumer price index) inflation for the Philippines is expected to inch closer to the upper end of 4.0 percent of Bangko Sentral ng Pilipinas’ target range,” ING Research said.
“In turn, the BSP is unlikely to cut rates despite weaker growth,” it added.
ING said it continues to expect the central bank to keep policy rates unchanged for an extended period despite recent remarks from Governor Eli Remolona Jr. of a rate hike if oil prices climb to $100 per barrel and the dollar strengthens sharply.
“The Philippines remains one of the most oil‑exposed economies in the region and is likely to feel higher oil prices sooner than most Asian counterparts,” ING said.
“Risk of further oil disruptions should keep peso weaker vs. the USD (US dollar),” it added.
It projects the peso to trade at around P59.85 to the dollar in the near term, with only modest strengthening expected over the next year. Forecasts show the currency at P59.80 in one month, P59.50 in three months, and stabilizing at P59.00 over a six- to 12-month horizon, suggesting limited upside as structural vulnerabilities persist.
Compared with regional peers such as Thailand and Indonesia, ING said that the country is likely to feel the impact of higher oil prices sooner due to relatively “modest fuel buffers, rapid domestic price pass‑through, and a structurally wider current account deficit.”
“As one of the region’s most oil‑dependent economies, alongside Thailand, Korea, Vietnam and Singapore, a sustained rise in crude has meaningful external implications,” it said.
“The strain is already visible, with several local governments shifting to four‑day workweeks in response to the recent surge in fuel costs,” it added.
This exposure is expected to feed into inflation dynamics, ING added.
In a scenario where oil supply disruptions persist for at least a month, ING estimates that inflation could move closer to the upper end of the central bank’s 2.0 to 4.0 percent target.
Such an outcome would complicate the central bank’s policy path, as elevated price pressures may prevent it from cutting interest rates even if economic growth softens.
The interplay between inflation risks and external imbalances is also expected to weigh on the country’s external position. ING said it has raised its forecast for the Philippines’ current account deficit to 4.0 percent of gross domestic product (GDP) by 2026, reflecting higher import costs driven largely by energy.
“A $15/bbl (barrel of oil) increase in Brent crude could widen the Philippines’ current account deficit by around 0.7 percent of GDP, assuming stable demand,” ING said.
“This would increase the risk of renewed peso weakness if elevated oil prices persist,” it added.
