Peso weakens as GDP growth slows in Q1

THE PESO dropped against the dollar on Thursday as economic growth slowed in the first quarter.

The local currency closed at PHP 55.75 versus the dollar on Thursday, down by eight centavos from Wednesday’s PHP 55.67 finish, data from the Bankers Association of the Philippines’ website showed.

The local unit opened Thursday’s session stronger at PHP 55.58 per dollar. Its worst showing for the day was at PHP 55.78, while its intraday best was at PHP 55.54 versus the greenback.

Dollars traded went down to USD 1.29 billion on Thursday from the USD 1.41 billion recorded on Wednesday.

The peso weakened as gross domestic product (GDP) growth slowed in the first quarter, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message

“The peso weakened after Philippine economic growth slowed to 6.4% in the first quarter of 2023, but above expectations of 6.1%,” a trader likewise said in an e-mail.

GDP growth slowed to 6.4% last quarter from 7.1% in October-December 2022, preliminary data from the Philippine Statistics Authority showed.

This was also below the 8% expansion seen in the first quarter of 2022.

Still, this was faster than the 6.1% median estimate in a BusinessWorld poll of 23 analysts conducted last week.

The government targets 6-7% GDP growth for the year.

Mr. Ricafort added that a generally stronger dollar and higher global crude oil prices also dragged the peso down.

The dollar index rose by 0.45% to 101.87 on Thursday, Reuters reported.

Meanwhile, Brent crude rose by 52 cents or 0.7% to USD 76.93 a barrel by 0828 GMT, while US crude futures gained by 48 cents or 0.7% to end at USD 73.04.

For Friday, the peso could depreciate further ahead of a potentially strong US producer inflation report set to be released overnight, the trader said.

The trader expects the peso to trade between PHP 55.65 and PHP 55.80, while Mr. Ricafort sees it moving from PHP 55.65 to PHP 55.85 against the dollar. — By AMCS with Reuters