The Philippine peso weakened considerably on Wednesday, breaching the P60 to the dollar mark, as global anxieties intensified. A fragile ceasefire between the United States and Iran hung in the balance, casting a long shadow over international markets and Philippine economic forecasts.
The peso closed at P60.115 against the US dollar, a drop of 24.5 centavos from the previous day’s P59.87. Despite a promising start to the trading day, reaching P59.69, the currency succumbed to mounting pressures throughout the session, nearing its lowest point of P60.13.
Traders pointed directly to the uncertainty surrounding the US-Iran situation, specifically the closure of the Strait of Hormuz, a vital artery for global oil and gas. The presence of US forces in the region extinguished early optimism regarding a lasting ceasefire, fueling demand for the dollar as a safe haven.
Adding to the peso’s woes, several institutions revised their economic growth projections for the Philippines downward. Concerns grew that escalating tensions in the Middle East would trigger inflation and disrupt economic activity, impacting the nation’s overall performance.
The International Monetary Fund (IMF) significantly lowered its 2026 GDP growth forecast for the Philippines to 4.1%, a substantial decrease from its previous estimate of 5.6%. This revised figure falls short of the government’s target range of 5-6% and even trails the projected 4.4% growth for 2025.
Moody’s Ratings followed suit, reducing its growth projection to 4.9% from 5.5%, also below the government’s objectives. These downgrades signal a growing consensus that the Philippines will face significant economic headwinds in the coming years.
Looking ahead, traders anticipate the peso to fluctuate between P59.50 and P60.20 against the dollar on Thursday, contingent on the evolving situation between the US and Iran. Experts predict a similar range, between P59.95 and P60.20, emphasizing the continued uncertainty.
Interestingly, the US dollar itself experienced a dip on Wednesday, retreating from its recent gains as hopes for renewed talks between Washington and Tehran resurfaced. This shift in sentiment briefly boosted risk appetite, lessening the immediate demand for the dollar as a secure investment.
However, the closure of the Strait of Hormuz remains a critical concern. This strategic waterway, responsible for a fifth of the world’s oil and gas shipments, has been effectively blocked, causing oil prices to surge and raising fears of a broader impact on global growth and inflation.
While a potential resumption of talks in Pakistan offered a glimmer of hope, the failure of previous negotiations casts doubt on the durability of the current ceasefire. Investors are cautiously optimistic, clinging to the possibility of a diplomatic resolution.
The primary focus now centers on assessing the economic fallout from the energy shock. Crude oil prices have soared, exceeding $140 a barrel in physical markets, despite a slight easing in futures prices. The IMF has already adjusted its growth outlook, acknowledging the detrimental effects of the war-driven energy price increases.
The IMF’s most pessimistic scenario paints a grim picture, with the global economy teetering on the brink of recession. Under this outlook, oil prices could average $110 a barrel in 2026 and climb even higher to $125 in 2027, exacerbating economic challenges worldwide.
