As the Philippine peso slips further against the U.S. dollar, recently hovering around ₱59 and projected to weaken to ₱60 or even ₱62 within the year, Filipino consumers are bracing for ripple effects. But while a weaker currency typically rings inflationary alarm bells, data suggests the impact on Philippine inflation might not be as dramatic as many fear.
Peso’s Dip: The Numbers Behind the Nervousness
In 2022, the peso plunged 10.5% against the U.S. dollar. It briefly rebounded in 2023 with a modest 1% uptick, only to fall another 4.2% in 2024. Simultaneously, inflation surged, peaking at 6.0% in 2023 before cooling to 3.2% in 2024.
As 2025 unfolds, global economic uncertainties, including expected U.S. protectionist policies under the second Trump administration, continue to rattle regional currencies. According to Philstar and Manila Bulletin, some analysts believe the peso could touch ₱62 if external pressures mount.
Is Depreciation Really to Blame for Inflation?
Not entirely. According to a study by the ASEAN+3 Macroeconomic Research Office (AMRO), the direct link between peso depreciation and inflation in the Philippines is limited. The research shows that a 1% depreciation against the U.S. dollar raises quarterly inflation by just 0.046 percentage points quarterly, and 0.091 percentage points cumulatively over a year.
Compared to regional peers, this “low pass-through” rate reflects a growing credibility in the Bangko Sentral ng Pilipinas (BSP)‘s monetary policy and a shift in market dynamics. Structural improvements in trade, stable consumer expectations, and targeted government interventions have all helped reduce the peso’s influence on inflation.
BSP: Calming the Currents, Not Controlling the Tide
Rather than fighting every fluctuation, the BSP is letting the peso act as a shock absorber in uncertain times.
“We’re more concerned about the volatility than about the longer-term depreciation. It’s not about a weak peso; it’s about a stronger dollar,” BSP Governor Eli Remolona Jr. recently stated.
The central bank has hinted at the possibility of rate cuts later this year, potentially bringing rates to around 4.6% in response to easing inflation. But it’s moving cautiously to ensure stability without undercutting economic momentum.
Bigger Picture: Growth Remains on Track
Despite currency concerns, the Philippine economy is projected to grow around 6.0% in 2025, in line with government targets. Inflation is expected to stay within the BSP’s comfort range of 2-4%, supported by moderating global commodity prices and policy measures like the reduction in rice import tariffs implemented in July 2024.
These efforts, combined with a disciplined monetary stance, are key to preserving purchasing power while allowing the peso to adjust organically to global headwinds.
Final Thought: Don’t Panic, Prepare
The peso’s slide might feel alarming, but the data tells a more measured story. Inflation is not spiraling, the central bank is active and credible, and economic fundamentals remain intact.
In a world where markets react to headlines, understanding the nuance behind currency movements is more important than ever. For the Philippines, the peso isn’t collapsing, it’s adjusting. And the economy, for now, is taking it in stride.
