ASIAN currencies, including the Philippine peso,
are expected to further
strengthen against the US
dollar this year while most
current account balances
across the region will remain
in positive territory.
UK-based Oxford Economics head of Asia economics Louis Kuijs said in a report that the global weakness
of the greenback since 2020
would likely spill over to
2021 as emerging markets in
Asia catch up to the US’ level of gross domestic product
(GDP) per capita.
“In the coming two decades, we expect the catch-up
to remain a significant source
of real appreciation for Asian
emerging market currencies”
except for the South Korean
won, Oxford Economics said.
In particular, the economies of China, India and the
Philippines will “grow relatively fast” in the upcoming decades and bring “significant further catch-up-driven
real exchange rate appreciation” in their currencies, Oxford Economics added.
In the near term, it said
Asian currencies would appreciate as risk appetite benefits them while the US’ twin
deficits—budget deficit and
weigh on the dollar.
In the case of the peso,
Oxford Economics projected it to further appreciate by
more than 2 percent by the
end of 2021, following a more
than 5-percent gain in 2020.
The peso strengthened
last year as the current account swung to a surplus estimated at 3.3 percent of GDP,
reversing the deficits recorded in the previous years.
The surplus came on the
back of a sustained slump
in the importation of goods
which were bought in dollars, as exports gradually
recovered from the pandemic-induced weakness in global trade.
While the current-account surplus strengthened
the domestic currency, economists had warned that it
nonetheless reflected sluggish economic recovery as
external trade-in-goods and
capital investments slowed.
Oxford Economics projected the Philippines’ current account to remain at a
surplus in the next two years,
although narrowing to 1.1
percent of GDP in 2021 and
0.2 percent in 2022.