7.2% high inflation rate weakens Philippine peso — economist

The Philippine peso is experiencing a decline in value due to high inflation rates, according to economist Emmanuel Leyco. In September, the peso reached a record low of P62.9 against the US dollar, with inflation being the primary factor affecting its worth. Leyco stated that despite the 5% interest rate hike by the Bangko Sentral ng Pilipinas (BSP) in August, inflation continues to overshadow its effects.

The economist explained that borrowing and spending become more expensive as the benchmark rises, causing the peso to lose attractiveness to investors. Investors are shifting towards the US dollar, which offers more competitive interest rates against inflation. This shift puts pressure on the BSP, as it must decide whether to increase or maintain the interest rate.

Higher rates would make it difficult for businesses and individuals to obtain loans, while keeping rates low would further weaken the peso. Leyco emphasized that the impact of currency depreciation is particularly significant for ordinary households, as it increases the cost of essential imported goods like oil and rice, exacerbating inflation.

To address the issue, Leyco proposed government interventions, such as suspending the excise tax on certain fuel products to provide relief to the market and the public, and strengthening purchasing power to prevent a slowdown in the economy.