High energy prices and persistent geopolitical instability are poised to deepen the Philippines’ external imbalances, heightening depreciation risks for an already fragile peso, according to analysts at Dutch financial giant ING

ING wrote in its latest report, published last Friday night, that it has slashed its Philippine gross domestic product (GDP) growth projection to 4.5 percent from 5.2 percent previously, as the economy's high exposure to Middle East war shocks could arrest the rebound from its corruption-led slump.

“The Philippines remains one of the most oil-exposed economies in the region,” Chris Turner, ING global head of markets and regional head of research for UK & CEE, and Francesco Pesole, ING foreign exchange strategist, said.

“The economy is entering this period of elevated energy costs from a position of vulnerability, following a weak 2025 performance driven by a sharp contraction in government spending,” Turner and Pesole added.

Recall that Philippine GDP growth clocked in at 4.4 percent in 2025, a lackluster performance injured by the government’s fiscal squeeze following the unearthing of misuse of infrastructure project funds.

Citing declining economic growth and an expected easing of tensions between the United States (US) and Iran, ING priced in a continued hold in the current 4.25 percent benchmark rate at this week’s policy meeting.

“Moreover, higher oil prices are likely to widen the current account deficit further. This deterioration heightens depreciation risks for the Philippine peso,” the Dutch lender added.

Note that the Bangko Sentral ng Pilipinas’ (BSP) refrain has been no defense of any particular exchange-rate level unless inflationary. This, along with the central bank’s modest interventions, “suggests limited resistance to further currency weakness.”

“Domestic tightening alone is unlikely to materially shift the peso’s trajectory,” ING further stressed, with the lender projecting the local currency to remain stuck at ₱60:$1 over the month ahead, and to gradually gain upward momentum to ₱59:$1 after a year.

For this week, Singapore-based Oversea-Chinese Banking Corp. (OCBC) has projected a softer start for the peso after the failure of US-Iran negotiations left regional markets cautious.

“Higher-beta and net oil importer [currencies], including the South Korean won, Thai baht, peso, and Indian rupee, may remain more vulnerable,” OCBC forex strategists Sim Moh Siong and Christopher Wong wrote in a commentary published last week.

Higher-beta currencies are highly sensitive and more vulnerable to market shocks, such as oil price spikes or geopolitical tensions.

While the resumption of limited transit through the Strait of Hormuz has tempered fears of a disorderly selloff, OCBC maintains a defensive outlook for the peso, signaling currency weakness.

Even with a cautious outlook, OCBC expects the peso to steady at ₱60:$1 in the current quarter, rising further to ₱59:$1 from the third quarter of 2026 until the first quarter of 2027. A year from now, the peso is expected to settle at ₱58:$1.

Meanwhile, Singapore-based UOB has a more somber outlook for the peso, expecting the local currency to slump to ₱61.5:$1 in the current quarter and remain at ₱60:$1 through early next year.