Import Collapse Turns Into a Boon for

Philippines’ Currency
Bloomberg3 days ago

Philippine Peso currency notes. (Photo by: Universal Education/Universal Images Group via Getty
Images)

By Chester Yung and Masaki Kondo

One consequence of the Philippines’ struggling economy is turning into a
boon for its currency.
A collapse in imports has had a positive effect on the nation’s trade
deficit, leading to lower demand for overseas currencies and helping to
strengthen the peso. The Philippine currency is the best performer in Asia
this year, up more than 2% against the dollar.
“With Philippine growth likely to be hamstrung by enforced and voluntary
social distancing, imports will remain weak,” said Eugenia Fabon
Victorino, head of Asia strategy at SEB AB in Singapore. “This will cap
the trade deficit, allowing the peso to strengthen.”
(Source: Bloomberg)

Sharp slump in imports helps Philippine peso rally against dollar

Imports slumped 41% year-on-year in May following a record 65% tumble
in April. That’s a continuation of a trend seen in the first quarter, when a
decline in goods imports outpaced a drop in exports, narrowing the
country’s goods trade deficit to $10.2 billion from $12.2 billion a year
previously.
The smaller gap is helping offset the impact of a decline in remittances
from the Philippines’ overseas workers, which is expected to weigh on the
currency. Bangko Sentral ng Pilipinas estimates a 5% slide in remittances
this year to $28.6 billion.
The Philippines is bracing for its deepest economic slump in more than
three decades, with a contraction of 2% to 3.4% on the cards for this year
as virus cases continue to rise. President Rodrigo Duterte said he will
“have to be very circumspect in reopening the economy” given the recent
spike.
This year will be the year that investment drops off, and with it demand
for imports and dollars, “which translates to the stronger peso story,” said
Nicholas Mapa, senior economist at ING Groep NV in Manila.