MANILA, January 04, 2017 (Bloomberg): Southeast Asia’s worst-performing currency of 2016 is in for another tough year with President Rodrigo Duterte’s spending plans seen boosting imports just as rising U.S. interest rates spur capital outflows.
The peso is forecast to be collateral damage as an economy growing faster than 7 percent and the government’s infrastructure program drive demand for inward shipments. This year will be the first in about a decade when the amount of money Filipinos send home from overseas will be lower than the trade deficit, estimates ING Groep NV.
“It’s a challenging situation for the peso for the next couple of years,” said Joey Cuyegkeng, an economist at the Dutch lender in Manila. “A very strong domestic sector requires imports of both consumer goods and durable equipment as the economy expands and moves into investment-driven growth.”
The peso, which dropped 5.2 percent against the dollar in 2016, will fall a further 4.4 percent to 52 by the end of this year, predicted Cuyegkeng. The uncertain international environment, with Donald Trump poised to take office as U.S. president, and nervousness over President Duterte’s pivot toward China is likely to push investors to demand a peso premium, he said.