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Economic growth in the Philippines is expected to stay strong. But this will not help the peso, as the deterioration in the current account will remain a drag on the currency. Strong domestic demand has seen import growth outpace exports, leading to large trade deficits.
Growing remittances and business process outsourcing (BPO) receipts have not been enough to offset that. The risk is that overheating of growth could lead to a current account deficit for the first time since 2003. The last time the Philippines ran current account deficits, the peso was trading in a 52-55 range.
"We have downgraded our PHP forecasts, and now expect it to weaken to 51.5 by the end of 2017, from 51.0 previously," ANZ Research commented in its recent report.
