The peso has finally breached P60 to the dollar. This is historical at first, but not entirely surprising.
For several weeks, the Bangko Sentral ng Pilipinas (BSP) has been sell dollars from his savings to prevent the exchange rate from exceeding this level. But like King Canute, BSP can stem the tide to some extent. When the underlying pressure continues, no amount of intervention can prevent the inevitable.
Before we panic, it’s worth asking: what exactly changed between P59.90/USD and P60.10/USD? The honest answer is: not much.
More than anything, the P60 score is more a psychologically restriction. Markets, like people, adjust to round numbers. Businessmen are watching them, headlines are written about them, and politicians are scrambling to react. But from an economic point of view, there is basically no difference regarding the exchange rate of P60/USD versus P59/USD. The exchange rate is a continuous variable and not a cliff edge.
That said, the forces driving the peso down are real and worth understanding.
Why is the peso weakening?
If you didn’t know yet, the Philippines operates under a floating rate exchange mechanism. The dollar-peso rate is largely determined by supply and demand, in the same way we allow gas and diesel prices to be determined by supply and demand.
The BSP occasionally intervenes to smooth out excessive volatility in the exchange rate, but it does not (and should not) defend a specific exchange rate. Doing so will be very costly (the BSP will have to release billions of dollars) and ultimately futile if the underlying deflationary pressure is too great.
So what causes depreciation? There is a convergence of forces at play.
First, the US dollar has been strong around the world despite the difficult financial situation, and despite the war it has started in the Middle East. The dollar is now viewed as a safe propertyespecially since the United States is supposed to face the oil price shock as the main oil producer. In fact, since 2018The United States has become the largest producer of crude oil in the world, surpassing Saudi Arabia and Russia.
As dollar-denominated assets become more attractive to investors around the world, capital flows to the US, and currencies such as the peso, weaken. This is not unique to the Philippines; Many other currencies have come under pressure. The Korean won, for example, just fell 17 years down against the dollar.
Second, the ongoing conflict in the Middle East has sent oil prices soaring, and the Philippines imports almost all of its crude oil. Higher oil prices mean higher demand for dollars to pay for those imports, which puts further downward pressure on the peso. The timing could not be worse, especially for a country that has been importing more than it exports for a long time, because this creates a structural demand for foreign exchange that weighs on the exchange rate over time.
These forces reinforce each other. A strong dollar, expensive oil, and a trade deficit are all pushing in one direction. The BSP’s dollar selling may slow the slide, but it may do little (if anything) to reverse it.
Winners, losers, and the question of inflation
A weak peso is not automatically bad news for everyone. Basically, it helps our exporters: when the peso depreciates, Philippine goods and services become cheaper in the eyes of foreign buyers. The IT–BPM industry, which earns revenue in dollars, benefits. Filipino overseas workers sending money home see their remittances denominated in pesos.
But in the current context, I suspect there are more losers than winners. A weak peso makes imports more expensive, and we are a very import-dependent economy. Everything from oil to electronics to manufacturing raw materials gets more expensive when the peso falls. For ordinary consumers, this means higher prices at the pump, at the grocery store, on electricity bills, on travel booking sites, and on online shopping platforms.
Inflation was already heading in the wrong direction even before the peso’s latest slide. Consumer prices rose 2.4% in February 2026 compared to last year, and we should expect an increase in inflation from March 2026 onwards.
The combination of rising oil prices and a weakening peso is a shock that will feed directly into higher consumer prices in the coming weeks and months.
Weak peso, weak economy?
Conventional wisdom dictates that a weak currency means a weak economy. That is an obvious mistake.
Some countries with strong export sectors benefit from a weak currency. In the mid-2000s, China was accused of deliberate hoarding the yuan is undervalued precisely for this reason.
But in the current context of the Philippines, peso weakness appears to be consistent with broader signs of economic weakness. Last year, growth slowed to a trickle 4.4%. Inflation is now starting to rise. The fiscal deficit remains wide. Consumer and business confidence has been shaken.
In short, the devaluation of the peso does not happen in a vacuum. It is part of the bigger picture of an economy under stress from many sides.
This is what makes the current situation different from run of the mill coin flips. The peso is weak at a time when the economy cannot afford it. The high cost of imports will inevitably strain already strained household budgets. High inflation will pressure the BSP to tighten monetary policy, which could further weaken growth. And a wider trade deficit, fueled by more expensive oil imports, will put more pressure on the peso going forward.
What to watch
The BSP now faces a difficult balancing act. It needs to signal to the Filipino public that it is above inflation, but tightening (excessively raising interest rates) in response to the risks of a supply-side shock leading to an economic downturn.
As I argued in my previous columnthe right approach is a measured response: hold levels or adjust moderately, communicate clearly, and avoid overreacting to headline numbers that are driven by external shocks rather than overheating.
For the Marcos administration, the P60 peso violation should be a reminder that macroeconomic management requires more than press conferences, emergency proposals, Band-Aid solutions, and populist measures (such as adjusting our thermostats, cutting taxes, or expanding. Free Ride) Extreme weaknesses, including our dependence on oil imports, our trade deficit, our insufficient investment in domestic energy and production capacity, are deeply structural and will not be fixed overnight.
Meanwhile, the P60 is just a number. Don’t let this round number put you off. The real question is whether the forces driving the peso lower are short-lived or persistent — and right now, the evidence suggests they won’t be going away anytime soon. Get ready for a tough ride for the rest of 2026. – Rappler.com
Dr. JC Punongbayan is an assistant professor at the UP School of Economics and author of False Nostalgia: Marcos’ “Golden Age” Myths and How to Unravel Them. In 2024, he received the Outstanding Youth Award (TOYM) for economics. Follow her on Instagram (@jcpunongbayan)
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