MANILA - The Department of Finance said Tuesday the Philippine peso appreciated because of the country’s mild inflation and a balance of payments (BOP) surplus reflected in its record-high foreign currency reserves as of June this year.
The peso closed at 48.88 to the US dollar at the end of trading Tuesday. Since January 2, the peso has strengthened 4.5 percent.
Finance Secretary Carlos Dominguez III said the peso strengthened because of the Philippines’ low inflation rate of 2.7 percent.
“Our inflation rate is relatively mild. And I think people have confidence in the Philippines, in the currency,” Dominguez said.
He also said the drop in the country’s imports versus its exports during the COVID-19 lockdowns led to a BOP surplus, which contributed to the strong performance of the peso.
Imports fell 24.5 percent in June after plunging 40.6 percent in May compared to the same months in 2019, data from the Philippine Statistics Agency showed.
Dominguez also said that the country was able to tap foreign loans from multilateral agencies and the bond market at very favorable terms, thus raising the Philippines' foreign reserves.
The Bangko Sentral ng Pilipinas (BSP) reported an overall BOP surplus of $80 million in June 2020, a reversal from the $404 million BOP deficit recorded in the same month last year.
The DOF noted that the country has $98 billion in gross international reserves (GIR) as of end-July 2020.
"This is actually larger than our total foreign debt," Dominguez said.
As of June this year, the national government's foreign debt stood at P2.864 trillion according to the Bureau of Treasury.
The BSP has said that the country's external debt remains manageable despite the rise in foreign borrowings this year because of the need to fund the COVID-19 response.
The Philippine economy shrank a record 16.5 percent in the second quarter after the country was put under one of the longest and strictest lockdowns in the world in a bid to contain the spread of COVID-19.
An independent survey also showed that joblessness hit a record-high 45.5 percent in July with around 27.3 million Filipino adults unemployed.