The Philippine peso's recent gains are likely to be temporary, with experts predicting a depreciation to ₱63 per dollar by the end of 2026. This outlook comes despite the Bangko Sentral ng Pilipinas (BSP) maintaining a hawkish stance and expressing readiness for further tightening. Analysts at ANZ Research and DBS pointed to the Philippines' external deficit and a resurgence in global energy prices as key factors that will pressure the currency. The peso had shown some resilience, outperforming currencies like the Indonesian rupiah (8.2% decline), Indian rupee (6.1% decline), and Thai baht (5.8% decline) in the first half of 2026, though it still weakened by 4.6% against the US dollar during that period.
Driving the hawkish stance of the BSP is persistent core inflation, which quickened to 4.4% in June, exceeding the central bank's target of 3% and its 2% to 4% tolerance band. This is happening even as headline inflation moderated to 6.4% in June from 7.2% in April. DBS expects the BSP to implement an additional 50 basis points (bps) in interest rate hikes through the third quarter, bringing the benchmark rate to 5.25%. Similarly, ANZ anticipates two more 25 bps hikes in August and October, also reaching 5.25%.
While some analysts, like those at Metrobank and Security Bank, foresee a final 25 bps hike in August to cap the tightening cycle, the overall sentiment points to continued pressure on the peso. Barclays, for instance, believes that while a recent Iran-U.S. agreement might offer a temporary boost, the peso's gains will be limited due to the Philippines' challenging macroeconomic conditions, including weak remittance flows and the reliance on financing inflows. Despite the BSP's active resistance to peso weakening near the ₱61.75 level, the underlying economic factors and external environment are expected to dominate, leading to a weaker peso by year-end.
