THE Philippine peso is seen to continue appreciating this year and into next year, amid expectations that the United States (US) dollar would remain weak for a longer time, according to the latest forecast of Singapore-based DBS Bank Ltd.
In its latest foreign exchange (FX) quarterly report for the second quarter of 2025, dated May 20, DBS Group Research projected the peso to strengthen further—from ₱57.3:$1 at the end of the first quarter to ₱55.6 in the current quarter, ₱55.4 in the third quarter, and ₱55.2 in the fourth quarter of this year.
By next year, DBS forecasts the peso to sustain its strength against the greenback, to reach ₱55:$1 in the first quarter of 2026, ₱54.8 in the second quarter, ₱54.6 in the third quarter, and ₱54.4 in the fourth quarter.
DBS noted that during the first 100 days of US President Donald Trump’s second term, the peso gained 4.2 percent versus the US dollar.
But when Trump announced reciprocal tariffs on US trading partners—including a 17-percent tariff on imports from the Philippines—during his so-called “Liberation Day,” the peso slightly weakened by 0.2 percent against the dollar.
The peso nonetheless rebounded by one percent to date since Trump announced a three-month pause on tariffs last April 9.
DBS considers the peso as one of the most overvalued regional currencies, alongside the Thai baht, while the Chinese yuan and Indonesian rupiah are viewed as the most undervalued.
The Singaporean bank anticipates further peso strength this year as it projected the deficit in Philippines’ current account—or net dollar earnings—to narrow to 2.3 percent of gross domestic product (GDP) this year, before inching up to 2.5 percent of GDP next year.
Last year, the current account deficit stood at 3.8 percent of GDP.
However, DBS forecasts the Philippines’ GDP growth to reach only 5.8 percent in 2025 and 5.6 percent in 2026, below the government’s more ambitious target of six to eight percent annually.
This is despite headline inflation seen falling to an average of 2.6 percent this year and 2.4 percent next year—within the targeted two- to four-percent band of manageable annual price increases deemed conducive to economic growth.
With inflation staying within target, DBS expects the Bangko Sentral ng Pilipinas (BSP) to cut key interest rates by an additional 50 basis points (bps) before year-end—projecting 25-bp cuts at the Monetary Board (MB) policy meetings in June and August, before pausing at a policy rate of five percent for the rest of 2025 and 2026. (Ben Arnold de Vera/ MB)
