Sluggish Philippine economic growth, compounded by a wider trade deficit and a less interventionist Bangko Sentral ng Pilipinas (BSP), is expected to weigh on the peso’s recovery, potentially overriding the lift from expected easing of United States (US) interest rates.

Dutch financial firm ING has projected a neutral bias for the peso after it hit its all-time weakest level of ₱59.13 per dollar in October. ING forecasts a slight strengthening to ₱58.50 per dollar in the fourth quarter, up from the current ₱58.96 spot rate.

The firm expects stability in the first quarter of 2026, followed by a slip to ₱58.75 per dollar through the second and third quarters of 2026, before settling back at ₱59 per dollar in the final quarter of 2026.

“On balance, we expect external balances to weaken and the BSP to maintain a less defensive stance, which should keep the Philippine peso biased to the downside over the medium term,” Deepali Bhargava, ING’s Asia-Pacific (APAC) head of research and chief economist, wrote in a Nov. 10 commentary.

BSP Governor Eli M. Remolona Jr. earlier stated the central bank would only intervene in the foreign-exchange (forex) market if the peso’s drop was sharp enough to fuel inflation. The currency recently showed weakness after the BSP cut its monetary policy rate to 4.75 percent, driven by a downbeat growth outlook tied to an alleged corruption scandal in flood control projects.

Bhargava noted that the highly anticipated US Federal Reserve (Fed) easing “could offer some near-term support for the currency” through the end of the year. However, she warned that gross domestic product (GDP) growth could underperform expectations in the coming periods.

Third-quarter growth plunged to its weakest level in nearly five years at four percent, hampered primarily by the ongoing probe into the flood control scandal.

National Socioeconomic Planner Arsenio Balisacan conceded that hitting even the lower bound of the five to six percent full-year target would be challenging, as the year-to-date average stands at five percent, short of the 5.5 percent goal.

Balisacan estimated the economy must expand by 6.9 percent in the fourth quarter to meet the minimum target.

Bhargava said that the economy “likely suffered significant losses over the past two years due to corruption-linked schemes” even before the recent slump.

She added, “Historical precedent suggests that heightened scrutiny after such scandals often triggers prolonged fiscal tightening.” Tightened infrastructure spending from July to September was a major drag on the quarter's disappointing performance.

ING’s 2026 growth forecast of 5.8 percent carries the risk of a slower outcome, exacerbated by the vague direction of the government’s infrastructure spending plans.

The country’s balance of payments (BOP) position—a reflection of its global transactions—narrowed sharply to an $82-million surplus in September from $3.53 billion a year earlier, resulting in a massive deficit over the nine-month period.

On the upside, the peso could benefit from foreign debt inflows if the government achieves its anticipated inclusion of peso-denominated bonds in the Government Bond Index–Emerging Markets (GBI-EM).

“This could unlock significant foreign demand for peso-denominated government bonds, in turn improving liquidity,” Bhargava said. Foreign holdings are currently estimated at 5.5 percent to six percent, and inflows into the local bond market are expected to continue given anticipated BSP rate cuts and the possible index inclusion.