Peso sinks again on below-target economic growth

The peso fell again versus the dollar on Thursday as Philippine gross domestic product (GDP) growth missed the government’s target for a third consecutive year due to the ongoing fallout from a corruption scandal involving government infrastructure projects.

The local unit ended at PHP 58.945 against the greenback, sliding by 20.5 centavos from its PHP 58.74 finish on Wednesday, data from the Bankers Association of the Philippines showed.

The peso opened Thursday’s trading session just slightly weaker at PHP 58.78 against the dollar. Its intraday best was at PHP 58.75, while its worst showing was at PHP 58.95.

Dollars traded declined to USD 1.329 billion from USD 1.46 billion on Wednesday.

The peso sank as data released on Thursday showed that GDP growth fell below target in 2025, the first trader said in a phone interview.

“The peso weakened significantly following the weaker than expected Philippine GDP growth and the hawkish policy statements from US Federal Reserve Chair Jerome H. Powell,” the second trader said in an e-mail.

Philippine GDP growth slowed to 3% in the fourth quarter from 5.3% in the same period a year prior and the revised 3.9% print in the third quarter.

This was the slowest print in nearly five years or since the 3.8% contraction in the first quarter of 2021. Outside of the coronavirus pandemic, this was the worst since the 1.8% growth recorded in the fourth quarter of 2009, or during the Global Financial Crisis.

This brought full-year 2025 GDP growth to 4.4%, well below the government’s 5.5%-6.5% goal. This was slower than 2024’s 5.7% and was the weakest annual expansion since the 3.9% in 2011, counting out the 9.5% contraction in 2020 due to the pandemic. 

Officials said tighter public spending and weak investor confidence due to the flood control scandal continued to drag growth.

Meanwhile, the Federal Reserve held interest rates steady on Wednesday amid what US Fed chief Jerome H. Powell described as a solid economy and diminished risks to both inflation and employment, an outlook that could signal a lengthy wait before any further reductions in borrowing costs, Reuters reported.

For Friday, the second trader said the peso could rebound ahead of a likely softer US producer inflation report.

The second trader sees the peso moving between PHP 58.85 and PHP 59.10 per dollar on Friday, white the first trader expects it to range from PHP 58.80 to PHP 59.10. — Aaron Michael C. Sy