The Philippine Economy and the Peso

Posted on Posted in 2020-2021

By Patrick Ang


Before the pandemic, the Philippines had one of the best economies in Asia. According to the International Monetary Fund (2020), the country’s economy grew by an average of 6.3 percent in the past decade. This development, though, was capped for years because of the different limitations present in the country’s technology, government policies, and infrastructure at the time.

The government noticed this situation and started implementing the Build, Build, Build program as a way to counteract this (International, 2020). The added expenditure because of this was expected to bring the economy of the Philippines to a much greater height. New infrastructures concerning transportation and telecommunications are some of the key projects indicated in the report. Unfortunately, the pandemic had halted some of these constructions temporarily with the Philippines undergoing quarantine in 2020.


The result of the quarantine did not just delay the potential effects that the Build, Build, Build program was supposed to have on the economy but also threw the country to an immediate contraction. Based on the Philippine Statistics Authority (Gatpolintan, 2020), the Gross Domestic Product dropped substantially in 2020 when the quarantine was imposed. As seen in the graph below, the growth rate per quarter started to drop heading into the first quarter of the year before ultimately falling to a -16.9 percent contraction in the next quarter.

While the numbers have slightly risen afterward as the economy slowly recovered, the percentages still dwelled in the negative region. The -9.5 percent average in 2020 (PSA, 2021) is concerning, especially when being compared to the 6.3 percent average in the past three years as seen in the graph below (Economy, 2018). 


However, it is important to note that the Philippine Peso has gone in the opposite direction when compared to the GDP of the country at the start of 2020. According to the historical record of Marketwatch (n.d.), the local currency has continued to rise with respect to the United States Dollar as the last quarter of 2020 tallied an exchange of PHP 48.01 to USD 1.00. While the exchange has been dropping since Q3 of 2018, it is not until the start of 2020 that the USD has dropped in three consecutive quarters.


The United States though had experienced a rough year which might explain the Peso strengthening once more in 2020. The pandemic has left the US as one of the most gravely affected countries in the world in terms of infection and casualties (John, n.d.). Likewise, civil unrest due to various protests in the country made it even harder for businesses to cope with their current situations. One could also attribute the movement of the exchange to investor sentiments especially with a Presidential election that had two very different leaders running for the position. The first two months of 2021 saw the USD recovering a bit with the exchange rising to about PHP 48.67 as of the time of this writing which sort of backs the latter reason.


Regional currencies have also been very similar in the direction of their movements last year, which may prove that the stronger Peso is a result of an external factor. While Oxford Economics (de Vera, 2021) projected the continued rise in the Asian currency exchanges to the USD in 2021, the graph below illustrates some of the neighboring Southeast Asian countries tallying very volatile exchange rates over the past year (O’Neill, 2021) while the Philippines and Vietnam recorded more stable movements in the market (Peso, 2020). This was very beneficial especially during the first quarter of 2020 for the companies in the Philippines. These heavily relied on foreign currencies to fund their operations as they did not experience that much of a shock following the lockdown. 

Based on these figures, it is possible to account for the environment in the United States as one of the main contributors to the stronger Peso since the other countries in the region had similar movements. The question now, though, is why did the Philippines record a more stable exchange even if its GDP showed huge drops last year.

Finance Undersecretary and chief economist Gil S. Beltran mentioned that the country’s current account surplus may be the main reason for the more stable Peso (de Vera, 2020). Beltran states that as the country went into lockdown in the first half of 2020, imports have dwindled as well from the lowered demand. However, the country’s exports have continued which made the Philippines a net lender.* This resulted in the country having more foreign currencies and reserves in its pockets that offset its total foreign debt. 

Finance Secretary Carlos Dominguez III explains that this is what made up for the lack of local demand in the economy (Peso, 2020). The stability of exports gave a cushion for the Philippines as well as the Peso to somewhat avoid the full gravity of the negative effects of the pandemic especially with the huge negative contraction in the 2020 GDP numbers. Alongside this, Dominguez outlines that the government has also been restarting projects like the “Build, Build, Build” which would help restore consumer confidence in the economy with more jobs and consumption. These are done in hopes to place the country’s economy back on track to overshoot its pre-pandemic numbers.


*ERRATUM: An earlier version of the article mentioned that the Philippines is a net exporter. We apologize for this oversight.




Asian Development Bank. (2020, September 15). Philippine Economy to Decline Further in 2020 Amid COVID-19, With Recovery in 2021.


de Vera, B. O. (2021, January 15). Further strengthening of peso vs US dollar seen in 2021.


de Vera, B. O. (2020, August 20). Peso strengthens as imports slow down.


Gatpolintan, L. (2020, January 23). Timely budget passage to boost 2020 economic growth: Pernia. Philippine News Agency.,by%206.2%20percent%20in%202018


International Monetary Fund. (2020, February 6). The Philippines: A Good Time to Expand the Infrastructure Push.


John Hopkins University of Medicine. (n.d.). COVID-19 Map.


MarketWatch. (n.d.). USDPHP | Philippine Peso Advanced Charts. 


O’Neill, A. (2021, April 1). Gross domestic product of the ASEAN countries from 2010 to 2020. Statista.


Philippine News Agency. (2020, September 1). Peso among Asia’s strongest currencies amid mild inflation.


Philippine Statistics Authority. (2018, January 23). Philippine Economy Posts 6.6 Percent GDP Growth in the Fourth Quarter of 2017; 6.7 percent in 2017. 


Philippine Statistics Authority. (2021, April 8). PSA Releases Annual Revisions of the National Accounts of the Philippines.,percent%20for%20full%2Dyear%202020&text=The%20Philippine%20Gross%20Domestic%20Product,year%20growth%20rate%20for%202020 

The World Bank. (2019, October 10). Philippines Economic Update October 2019.,in%202020%20and%202021%2C%20respectively.&text=In%20the%20long%2Dterm%2C%20promoting,poverty%20reduction%20in%20the%20Philippines.

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