While the Philippine peso is expected to weaken further due to pressure from the latest central bank easing and ongoing Israel-Iran tensions, the University of Asia and the Pacific (UA&P) has projected that second-quarter economic growth accelerated faster than in the first quarter on still-tame inflation and faster job expansion.

“Economic indicators flashed slightly more positive signals, and so we expect the second-quarter gross domestic product (GDP) growth to improve to 5.6 percent year-on-year,” UA&P senior economist Victor Abola and research assistant Marco Antonio Agonia said in the latest edition of its monthly economic commentary titled “The Market Call,” published on June 23.

The Philippine economy expanded by 5.4 percent in the first quarter, slightly faster than the previous quarter’s 5.3 percent, but slower than the 5.7 percent seen in the same period last year. A 5.6-percent growth in the second quarter means faster acceleration.

But this would mean a failure if measured against the government’s target of six to eight percent for 2025.

When the government reported on the first-quarter GDP performance in May, the Department of Economy, Planning, and Development (DEPDev) said that the Philippines has to expand by 6.2 percent for every quarter of the year, beginning the second quarter, to meet the lower end of the target.

“Below-target inflation rate and more jobs in April should translate into stronger consumer spending in the second quarter, despite a more negative consumer outlook based on the BSP’s [Bangko Sentral ng Pilipinas] Consumer Expectations Survey (CES),” Abola and Agonia said.

Inflation dropped to 1.3 percent in May, the slowest in five-and-a-half years, or since November 2019. Over half a million jobs were also created in April, but data also revealed that the jobless rate inched up to 4.1 percent, the third time it clocked in higher than four percent in a year.

The Cabinet-level Development Budget Coordination Committee (DBCC) met twice to revisit its macroeconomic targets, the final being on Monday, June 19. Updated targets have yet to be released.

UA&P expects the peso to slump as the BSP’s and the United States (US) Federal Reserve’s “policy rate decisions diverge, along with the worsening Israel-Iran conflict.”

Citing early reports, Abola and Agonia said that the US dollar-peso exchange rate climbed to ₱55.7:$1 but remained below its 20-day moving average of ₱55.91 and 200-day moving average of ₱57.35.

Banking on the continued rise of the foreign exchange (forex), Abola and Agonia expect it to trade above ₱55.5:$1, driven by the “accelerated conflict in the Middle East.”

“Regional currencies could depreciate if US trade negotiations proceed faster than expected and the fiscal situation is addressed properly,” they added. The three-month reciprocal tariff pause imposed by US President Donald Trump will conclude early next month.

According to Australia and New Zealand Banking Group (ANZ), the Philippine peso has been among the worst-performing Asian currencies following the US’ direct attack on Iranian nuclear facilities over the weekend.

On the first trading day of the week, the peso closed at its weakest level in nearly three months, or since March 26, when it finished at ₱57.69 against the greenback.