While the Philippine peso is seen staying chained to the ₱59:$1 level by the end of 2025 owing to the flood control graft scandal, this prolonged weakness has become a boon to the wider trade deficit that the country has with the rest of the world.

“We expect peso weakness and front-loaded exports to support a modest narrowing in the current account deficit from four percent of gross domestic product (GDP) in 2024 to 3.4 percent in 2025 and 3.2 percent in 2026,” BMI said in a Nov. 24 report.

Despite support from the weak peso, BMI projected that the current account deficit would remain wider than the less-than-half-a-percentage-point (ppt) level posted between 2015 and 2019 during the administration of former president Rodrigo Duterte.

According to BMI, the graft scandal has worsened the performance of the local currency such that it created friction in the peso’s attempt to remain steady against the United States (US) dollar.

From its strongest level in May, the peso has experienced a series of depreciations, most evident after the flood control scandal erupted midyear. It can be recalled that the peso plunged to consecutive lows in October and November before it began its slight rebounds in recent days.

Since January, however, the local currency has weakened against the greenback by 1.7 percent. From its peak in May, it has dropped by 6.6 percent.

The peso is expected to trade against the US dollar at around ₱59:$1 by the end of 2025 and fall further to ₱59.50:$1 by the end of 2026.

BMI also flagged the damage the flood control scandal will have on foreign investors planning to establish brick-and-mortar operations in the Philippines.

BMI said the corruption scandal, which was first unearthed before the third quarter of the year, “will dampen foreign direct investment (FDI) inflows into 2026, adding to pressures from macroeconomic uncertainty and global trade tensions.”

Recent reports indicate that the current account deficit narrowed to around 3.1 percent of the country’s output in the first semester, nearly one-ppt slimmer than the four percent recorded last year.

While this suggests stronger goods exports, the 19-percent US tariff on Philippine-made products has begun putting pressure on the country’s total shipments. Exports to the US, the country’s top trading partner, dropped by 0.3 percent year-on-year.

As of the third quarter, the Philippine economy crawled to a four-percent growth rate, its weakest pace in four-and-a-half years. Third-quarter growth also fell miserably short of the government’s already lowered target for the entire year of at least 5.5 percent.

Average GDP growth stood at five percent for the first three quarters. Political uncertainties tied to the probe into the alleged massive pocketing of flood control funds prompted the Bangko Sentral ng Pilipinas (BSP) and the Department of Finance (DOF) to tweak their growth expectations downward.

National Socioeconomic Planner Arsenio M. Balisacan also conceded that the local economy has entered a challenging situation where accelerating to six percent—the midpoint of the full-year target—is nearly impossible.