Peso seen weakening to P54:$1 by yearend
Credit to Author: MAYVELIN U. CARABALLO, TMT| Date: Tue, 28 May 2019 16:25:53 +0000
THE government’s infrastructure push in the second half of 2019 could lead to the peso closing weaker against the dollar by yearend, according to HSBC Private Banking.
“We expect USD-PHP (US dollar-Philippine peso) to reach 54.0 by end-2019, given the re-widening of the current account deficit,” HSBC Private Banking Managing Director Chuek Wan Fan told reporters in a roundtable in Taguig City on Tuesday.
The peso ended 2018 at P52.58 versus the greenback, sharply down from its 2017 close of P49.93:$1.
The local currency is currently trading against the dollar within the P52:$1 level. On Tuesday, it closed 8 centavos weaker at P52.30:$1.
Fan said the expected peso depreciation this year would be led by the expected widening of the current account deficit, “especially going into the second half, because of the acceleration in public spending in infrastructure projects.”
The HSBC official’s view was consistent with the announcement made by the country’s economic managers — Finance Secretary Carlos Dominguez 3rd and Socioeconomic Planning Secretary
Ernesto Pernia — last week that they would embark on a bold “expenditure catch-up plan” boost gross domestic product growth to above 6 percent and offset the negative impact of the delayed passage of the 2019 national budget on economic growth.
This plan includes an infrastructure spending target of P792.97 billion for the second to fourth quarters after actual infrastructure spending reached P207.2 billion in the first.
To achieve these targets, the economic managers said the Public Works and Transportation departments had committed to spend a combined P803.1 billion in the next three quarters.
“Infrastructure spending would increase the imports and will drive the trade deficit to widen a bit,” Fan explained.
Trade balance is one of the key components of the country’s current account.
Last year, robust economic activity that resulted in a wider trade gap worsened the current account, which hit an all-time-high deficit of $7.9-billion.
The latest current-account deficit is equivalent to -2.4 percent of gross domestic product.
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