The Philippine peso weakened further to P64.17 against the US dollar on Tuesday afternoon, Oct. 27, 2026, after breaching the P64 level for the first time during morning trading, raising concerns over the economic outlook and adding pressure on businesses, particularly micro, small and medium enterprises (MSMEs).
The latest decline came 12 days after the peso first breached the P63 level. Rising oil prices, geopolitical tensions and concerns over the domestic economic outlook continued to weigh on the local currency.
In an interview, entrepreneur Steven Yu said external factors were primarily driving the peso’s weakness. He added that even the Bangko Sentral ng Pilipinas’ (BSP) 50-basis-point interest rate hike had failed to arrest the currency’s slide.
“The scenario is quite bleak for the first quarter next year unless there are developments that could temper the weakness of the economy,” Yu said.
Yu warned that a further increase in the US Federal Reserve’s benchmark interest rate or an escalation of conflicts in the Middle East and Russia could put additional pressure on the peso and the Philippine economy.
He said the government should prioritize addressing the country’s fiscal position rather than relying heavily on higher interest rates, which could undermine business activity.
“Further increases in interest rates are simply ruinous to the business sector, especially the MSMEs,” he said, warning that tighter monetary conditions could further slow an already weak economy and potentially push it into recession.
Yu said a 25-basis-point increase by the BSP would have been a reasonable middle ground.
The peso’s depreciation could also affect consumers and businesses, particularly those dependent on imported fuel, food, raw materials and equipment.
A weaker currency raises the peso cost of dollar-denominated imports, potentially adding to inflationary pressures and increasing operating expenses.
Overseas Filipino workers and exporters, meanwhile, could benefit from more favorable peso conversions of their dollar earnings.
However, the extent of these gains would depend on their expenses and exposure to imported goods and other foreign-currency costs.
The peso’s continued decline highlights the challenges facing policymakers as global uncertainties and domestic economic concerns weigh on the currency. While the BSP has raised interest rates to help contain inflationary pressures, monetary tightening alone may not be enough to reverse the peso’s weakness.
The currency’s direction will partly depend on global oil prices, the strength of the US dollar, investor confidence and monetary policy developments in both the Philippines and the United States.
Business conditions seen flat in Q4
Yu expects business conditions to remain relatively flat and stable in the fourth quarter, supported by seasonal spending and holiday festivities. However, he anticipates greater challenges in the first quarter of 2027.
He urged businesses to prepare by tightening costs, improving operational efficiency and strengthening their ability to adapt to changing economic conditions.
He said companies could draw lessons from the Covid-19 pandemic, when businesses had to adjust their operations to survive prolonged uncertainty.
Yu expressed hope that businesses and policymakers would learn from the current episode and take steps to strengthen the economy’s resilience. / KOC