Palace expects weaker peso

MALACAÑANG expects the Philippine peso to continue depreciating despite the central bank’s interventions as it anticipates a wider current account deficit this year.

Palace Press Officer Clarissa A. Castro said the country’s current account deficit could further weaken the peso, but said the Bangko Sentral ng Pilipinas (BSP) is prepared to deploy a range of policy tools to stabilize the local currency.

“In the short run, we will attempt to dampen inflationary swings in the exchange rate,” she told BusinessWorld via Viber.

The peso’s decline drives up the cost of imported goods, especially petroleum, amplifying inflationary pressures as global oil prices stay high amid supply disruptions tied to the Middle East conflict.

Ms. Castro said that near-term measures will focus on dampening sharp exchange-rate swings that could stoke inflation.

“The BSP will rely mainly on intervention in the spot market to smoothen excessive short-term fluctuations amid potential outflows and market volatility,” she added.

The country is seeking to contain inflation risks as the Middle East crisis pushes the local currency to record-low levels.

The peso slid to a new record low last March 31, closing at P60.748 against the US dollar as escalating conflict in the Middle East drove investors toward the safe-haven greenback amid oil-driven inflation risks.

The currency has hit historic lows for three straight sessions and has repeatedly weakened since the US and Israel launched attacks on Iran on Feb. 28.

Malacañang last week acknowledged external shocks tied to the Middle East conflict had undercut the peso’s value and indicated the administration was preparing a suite of measures to mitigate the fallout for households and businesses.

The administration is strengthening price support and social relief efforts as part of its broader response, with interagency coordination to stabilize key commodity costs and speed up assistance delivery.

Measures under discussion include price caps on imported rice and an expansion of subsidized rice outlets, as well as potential adjustments to fuel tax policy. — Chloe Mari A. Hufana