Malacañang on Thursday reiterated that the Bangko Sentral ng Pilipinas (BSP) remains the primary institution tasked with stabilizing the peso and managing excessive volatility in the foreign exchange market, as the Philippine currency plunged to record-low levels against the US dollar.
External Pressures Blamed for Peso Weakness
In a press briefing, Palace Press Officer Claire Castro attributed the continued peso depreciation largely to external pressures rather than domestic weaknesses. She said the weakening is the result of overlapping global factors, particularly the sustained strength of the US dollar and rising international oil prices.
“There are two major ones. One is the unusually strong US dollar, which is pulling capital toward US assets and away from emerging markets like the Philippines. This makes the peso weaker simply because the dollar is rising faster,” Castro said, citing the statement from Department of Economy, Planning, and Development (DepDev) Secretary Arsenio Balisacan.
“The other main factor is the sharp global oil price spikes, combined with the country's dependence on imports. This causes the country's demand for dollars to spike, the trade and current account deficits to rise, and, in turn, the peso to weaken,” she added.
Administration's View on Currency Movements
Castro said President Ferdinand R. Marcos Jr. and the Palace recognize these external pressures and share the economic assessment provided by Balisacan. She noted that the administration views the current currency movements as largely reflective of international developments, including geopolitical tensions.
She explained that the peso’s weakening stems from a gap between dollar demand and supply. “In short, the peso depreciation reflects the rise of the demand for dollars faster than the supply of dollars,” she said.
Demand is driven by import payments, debt servicing, and other foreign currency obligations, while supply is supported by export revenues, remittances, and foreign direct investments.
BSP's Tools to Address Volatility
Castro emphasized that the BSP has both the mandate and the policy tools to address currency volatility. These include foreign exchange reserves, policy rate setting, credibility signaling, and macroprudential measures aimed at managing currency movements.
“It is the BSP, our central bank, that has the institutional mandate to stabilize the peso and prevent excessive volatility. Its ammunition is sufficient to prevent excessive volatility,” she said.
