USD/PHP set to end the year at 52.50, with risks to the upside – ANZ

The unanticipated strong rebound in Philippine economic activity is uneven, with domestic demand surging and the contribution from external trade concomitantly dwindling. The widening warrants a recalibration of fiscal and monetary policies but there are hitherto no indications of a shift in the policy stance. Economists at ANZ Bank forecast USD/PHP at 52.50 by end-2022.

Growing imbalance

“The domestic demand-driven recovery has been stronger than anticipated. At the same time, it is resulting in a rapid deterioration in the trade and current account positions. Unless fiscal and monetary policies respond in a timely manner, the peso will need to bear the brunt of this deterioration.”

“There has hitherto been no indication that monetary policy will respond to the external position whereas fiscal policy may prove to be intractable in the short-term.”

“We forecast USD/PHP to end 2022 at 52.50 with risks to the upside.”