Japanese financial giant MUFG Bank Ltd. has lowered its forecast for the Philippine peso, projecting the currency will weaken to 60 per dollar as the nation’s economic performance falters and corruption scandals derail government spending.

“We have adjusted our Philippine peso forecast profile weaker, and now see US dollar-peso rising towards the 60 level over time,” MUFG analysts wrote in its latest monthly forex outlook published on Monday, Feb. 2.

This somber outlook for the local currency implies “greater foreign exchange (forex) underperformance against the Group of Ten (G10) and peer currencies in Asia,” the Japanese lender stressed.

G10 refers to a group of industrialized nations with the most heavily traded and liquid currencies in the world, namely Japan, US, United Kingdom (UK), Canada, France, Germany, Italy, the Netherlands, Belgium, Sweden, and Switzerland.

MUFG has projected the peso to continue underperforming as it is seen bearing the brunt of the persistent drop in government spending owing to governance concerns tied to flood control graft.

Infrastructure spending plummeted in November 2025 as the Marcos administration curtailed funding releases for public works projects amid an intensifying crackdown on corruption in flood-control projects.

Government outlays for infrastructure and capital projects shrank 45.2 percent to ₱48 billion in November from ₱87.6 billion in the same period in 2024. This steep decline in spending marked a tightening fiscal grip as the Department of Public Works and Highways (DPWH) faced increased scrutiny over corruption allegations.

According to MUFG, it looked at the disappointing three-percent GDP print in the fourth quarter of 2025 as the major factor behind their duller peso outlook.

Apart from the flood-control-triggered fiscal squeeze, the lender cited several factors for the sharp moderation in output expansion, including easing consumer and business activity and heightened expectations that the Bangko Sentral ng Pilipinas (BSP) would proceed with an extended easing cycle.

“We have as such also added in one more BSP rate cut into our profile, and now see BSP bringing the policy rate to four percent from 4.5 percent currently by the first half of 2026,” read the commentary.

This move is expected, as the negative output gap—indicating the economy is growing below its potential—would keep the BSP on alert, likely prompting further easing in a cycle that was previously thought to be nearing its end.

To note, the Japanese bank has consistently cautioned that a dovish tone from the BSP is a drag on the peso.

Last month, BSP Governor Eli Remolona Jr. said the central bank remains alert to currency volatility but sees no immediate threat of the peso hitting ₱60 per dollar. He noted that any intervention would depend on the speed of the currency’s decline rather than a specific psychological threshold.

Earlier, President Ferdinand Marcos Jr. also expressed opposition to the peso sliding further toward the ₱60 level.

“We think the BSP will probably intervene to slow the pace of peso weakness over time but will not change the fundamental trend,” MUFG said.

Records show that the peso’s latest plunge to its weakest-ever level was in mid-January 2025, when the local currency plummeted to ₱59.46 per dollar on the back of mounting pressure stemming from both global and domestic events.

On prices, MUFG said rising local rice prices have added a layer of complexity to the BSP’s macroeconomic management, as the hike could push prices further up. As a result, “the risk for inflation is likely tilted towards it rising over time.”

As BSP sees it, consumer prices likely accelerated by up to 2.2 percent in January as higher costs for food staples and fuel threatened to push price growth back into the central bank’s target range, potentially ending a year-long streak of below-target readings.

A print at the upper end of that range would return inflation to the government’s two-percent to four-percent formal target band for the first time since February 2025. The Philippine Statistics Authority (PSA) is scheduled to release the official data on Thursday, Feb. 4.