Fiscal strengthening
Investor demand has helped make the Philippine peso the best-performing currency in the last three months of 2014, when it rose 1.5 percent against the already strengthening dollar. The peso was the only currency in ASEAN to strengthen against the dollar during this period. Standard Chartered has said that it expects the peso to settle to a rate of 45 pesos to the dollar by mid-2015 because “inflationary pressures [will] have eased, most notably from energy. Tighter monetary conditions should rein in inflationary pressures for now”.
An important result of the Philippines’ strengthening fiscal management should be easing inflation, this will be helped further by the current low oil prices and portfolio investments that will feed off the recent credit upgrade. According to BofA Merrill Lynch Global Research estimates, every 10 percent drop in oil prices leads to a 0.3 percent uptick in Philippine GDP, a -0.45 percent decline in inflation, and 0.2 percent increase in the country’s current account balance.