Malacañang says low inflation, strong reserves to support Philippine peso

THE Philippines’ economic managers remain confident the peso will be underpinned by low and stable inflation, ample foreign-exchange reserves and an improving investment climate, Malacañang said on Monday, even as the currency continues to trade near the P59-a-dollar level.

Palace Press Officer Clarissa A. Castro said the Bangko Sentral ng Pilipinas continues to allow the peso to be determined by market forces, while maintaining what the central bank has described as “robust” foreign-exchange reserves.

“The Bangko Sentral ng Pilipinas allows the exchange rate to be determined by market forces,” she told a news briefing. “We continue to maintain robust reserves.”

The peso has breached the P59-a-dollar mark several times since November and slid to a record low of P59.22 on Dec. 9. Analysts have linked the weakness partly to soft investor sentiment amid a widening graft scandal that has weighed on local confidence.

A weaker peso raises the cost of imports such as fuel, food and raw materials, adding pressure to inflation and squeezing household and business budgets. Still, authorities said inflation remains subdued and is expected to stay within target over the next two years, helping support domestic demand.

Inflation eased to 1.5% in November from 1.7% in October and 2.5% a year earlier, bringing the year-to-date average to 1.6%.

Ms. Castro also pointed to the country’s investment-grade credit rating as an anchor for the peso’s outlook. Standard & Poor’s has reaffirmed the Philippines’ “BBB+” rating with a positive outlook, citing low and stable inflation among the economy’s strengths.

“A high credit rating signals investors’ strong vote of confidence in President Ferdinand R. Marcos, Jr.’s leadership,” she said.

To reinforce confidence, the Marcos administration is moving to ease investment bottlenecks, including the temporary suspension of Bureau of Internal Revenue field audits following taxpayer concerns over letters of authority and mission orders. The government also plans to streamline regulations that hinder investment.

Ms. Castro cited reforms aimed at boosting productivity and foreign direct investment, including the Public-Private Partnership Code, Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act and Capital Markets Efficiency Promotion Act.

Authorities are also fast-tracking the rebuilding of infrastructure and communities hit by recent calamities to restore economic activity.

She added that the government is pursuing accountability over flood control anomalies, with more arrests expected before yearend.

Allegations that billions of pesos earmarked for flood mitigation were misused have intensified scrutiny of procurement and oversight, weighing on investor sentiment as the Philippines competes for capital amid tighter global financial conditions. — Chloe Mari A. Hufana