Continued remittance inflows and a better-than-expected current account position could keep the Philippine peso in P51:$1 territory for the rest of year, ING Bank said on Monday.
“The second-quarter current account report and July remittance growth support our guarded optimism for USD/PHP,” the bank said in a market report.
The second quarter’s small current account surplus, it noted, came as an upside surprise after two consecutive quarters of deficits.
The current account—a major component of the balance of payments—posted $15-million surplus in the second quarter of 2017, a reversal from the $1.25-billion deficit recorded a year earlier. It brought the first-half result to a $234-million deficit, lower than the $424 billion posted in the comparable 2016 period.
“The surplus was achieved despite only modest 4 percent growth of structural inflows. Outsourcing revenue growth was only 7 percent. We expect a recovery of structural inflows in second-half 2017,” ING Bank said.
The bank said it was “cautiously optimistic” that the current account for 2017 would be a surplus of around $450 million instead of the $600-million deficit forecast by the Bangko Sentral ng Pilipinas.
It said that third quarter overseas Filipino worker (OFW) remittances growth would likely be better than the 2 percent seen in the second quarter.
“The start of the third quarter looks promising. July OFW remittances were up 7.1 percent year-on-year,” ING noted, referring to the $2.28 billion in cash remittances, which only count money sent home via banks.
Some positive base effects helped since July 2016 remittances contracted by 5.4 percent year-on-year, it added.
“Seasonally strong inflows during the Christmas season together with expectations of BSP’s significant market influence underpin our P51 forecast for year-end,” it said.
Geopolitical tensions were blamed when the currency fell to P51 against the dollar last month.
The peso was already being described as Asia’s worst performer earlier in the year due to concerns over the current account, with some analysts predicting that it could hit P52 versus the greenback by the end of the year.
Economic managers have downplayed the impact of a weaker peso and Finance Secretary Carlos Dominguez 3rd has said the government would not intervene in the foreign exchange market.