Deutsche Bank AG forecast the Philippine peso could weaken to ₱60 against the United States (US) dollar, its weakest-ever level, citing flagging business sentiment rooted in public spending concerns.

The Germany-based bank, in its 2026 Asia Strategy Outlook, projected the local currency will eventually rebound to stronger levels of ₱57 to ₱58 per US dollar.

“Poor corporate sentiment is showing through; not just in potential capital expenditures (capex) decisions, but also in views on the currency, as per our recent conversations with onshore clients,” Deutsche Bank analysts wrote.

The peso slipped to an intraday low of ₱59.17 per US dollar on Thursday afternoon, matching the all-time low posted in November.

“We suspect this will play out in phases over the course of 2026 – possible peso weakness first, followed by some recovery as the current account deficit shrinks due to the infrastructure and capex factors,” the bank said.

A potential turnaround could even see the peso strengthen past ₱57 if the US dollar “sharply” loses footing, according to the report, adding that this, combined with a narrowing current account deficit, could boost the local currency.

Separately, Dutch financial firm ING Groep NV warned that the Philippine peso and the Indonesian rupiah “may remain vulnerable” among Asian currencies. This is due to an economic slowdown, continued policy easing, and domestic economic risks.

“Fiscal concerns and sensitivity to rate differentials amplify downside risks,” ING said, noting that expectations of further policy easing in both countries are pressuring their currencies.

Deepali Bhargava, ING’s Asia-Pacific (APAC) head of research and chief economist, added that besides higher risks from further easing, the peso faces pressure from sluggish output growth and “tariff headwinds weighing on sentiment.”

Deutsche Bank Economics expects the Bangko Sentral ng Pilipinas (BSP) to cut its benchmark lending rate twice more to bolster economic activity. The bank projects the negative output gap—the difference between the country’s potential and actual growth—will last until 2027.

BSP Governor Eli M. Remolona Jr. recently said a 25 basis point reduction in the key policy rate is possible at the Monetary Board’s (MB) last meeting but did not guarantee the move.

The BSP has already lowered the key interest rate by a cumulative 175 basis points (bps) to the current 4.75 percent from 6.5 percent before the easing cycle started in August 2024.

“Both currencies [peso and rupiah] are likely to diverge from broader USD trends, reflecting local structural weaknesses,” Bhargava said, which underpins her cautious outlook.

On the consumption side, Bhargava expects an ongoing probe into flood control graft to “keep sentiment subdued over the coming quarters, alongside moderating wage growth amid rising labor force participation.”