MANILA, Philippines - The peso-dollar exchange rate may settle at P37.5 by the end of 2013 due to continued strong domestic growth as well as broad US dollar weakness, according to investment banking giant Goldman Sachs.
Mark Tan, executive director for global economics, commodities and strategic research of Goldman Sachs’s Global Investment Research, said trade flows, foreign direct investments and strong remittance and portfolio (“hot” money) inflows will also impact on the appreciation of the peso.
In its report titled “Asia Economics Analyst,” Goldman Sachs noted that currencies across the Association of Southeast Asian Nations (Asean), including that of the Philippines, will appreciate until 2014 due to the weakness of the greenback.
The investment bank projected that the Philippine peso will further appreciate to P35 against the greenback in 2014 and will go back to the P40 level in 2015.
“Later, as improving US growth and approaching Fed tightening help the dollar to rally, the currencies of Asian countries excluding Japan [AEJ] tend to depreciate,” the report read.
On Thursday the peso opened at P40.653 against the greenback.
The continuous appreciation of the peso has raised concerns among companies in the business-process outsourcing (BPO) sector, exporters and overseas Filipino workers (OFWs) who send money to their families in the Philippines.
Meanwhile, Goldman Sachs said that it expects Philippine economic growth to moderate in the years 2013 to 2014.
For this year, gross domestic product (GDP) growth for the Philippines is projected by Goldman Sachs at 5.5 percent. For 2014 Goldman Sachs sees GDP growth at 5.5 percent, 5.6 percent in 2015 and 5.8 percent in 2016.
The Philippines posted a GDP growth of 6.6 percent in 2012. This figure is higher than the 5.9-percent economic growth forecasted by Goldman Sachs for the country last year.
Research group IBON said the economic growth posted in 2012 is a “jobless growth.” IBON estimates that the number of unemployed Filipinos increased by 48,000 to reach 4.4 million and the number of underemployed by 349,000 to 7.5 million in 2012.
“Government’s hype is meant to create an appealing image of the Philippine economy for foreign investors, even if the growth figures are meaningless to the ordinary Filipino,” the group said in a statement.