The peso will strengthen to as much as P41.50 to $1 this year as the Philippine economy recovers on the back of strong exports and higher international reserves boosted by remittances from overseas Filipino workers (OFWs). The peso-dollar exchange rate will go that level at the end of 2010 as exports rebound, Standard Chartered Banks said in the study, Philippines: Time for Showdown. Exports and the money sent home by OFWs would support the country's balance of payments (BOP) position. “Medium-term, the economic recovery and BOP dynamics should support the Philippine peso,” Standard Chartered said. Standard Chartered expects the country's gross domestic product (GDP) to expand by 3.3 percent this year from 0.9 percent last year, with the current account surplus rising to 5.5 percent of GDP from 5.3 percent because of more remittances and an improved trade balance. “This should support capital inflows into the Philippines.” The Cabinet-level Development Budget Coordination Committee (DBCC) expects the GDP to grow by 2.6 to 3.6 percent. “Despite near-term risk factors, ample overseas workers remittances will continue to buoy domestic consumption, so the overall economic impact of a potential election disruption should be limited, the British investment bank said. On the other hand, Goldman Sachs said in its Asia Economic Flash, Philippines: Two engine flows power the economy as it steers through elections, the peso would likely strengthen to P42.5 to $1 this year and P42 to $1 next year on the premise that there would be a smooth government transition after the May 10 polls. “Favorable flows and our expectation of the central bank raising rates are likely to be supportive of the peso. If the transition to the new president is smooth, it could also support the peso through improved sentiments. Our 3-, 6- and 12-month peso targets are at P43.6, P42.5, and P42, respectively, implying around 7.5 percent in appreciation over the 12-month forwards,” the American investment bank said. Meanwhile, the peso weakend by 37.5 centavos to close at P45.385 to $1 Thursday from P45 Wednesday. A total of $1.813 billion changed hands at the Philippine Dealing and Exchange Corp. Sources said the Bangko Sentral ng Pilipinas (BSP) is tweaking government's foreign exchange target. The BSP's Monetary Board is now discussing a proposal revising the foreign exchange assumption to P45 to P47 from P46 to P49, as the peso rose to a 20-month high after piercing the P44 barrier and closing at P44.23 to on April 23. Data from the BSP showed that the peso strengthened by 3.38 percent to an average of P46.0272 to $1 in the first quarter from P47.6372 at the end of December 2009.
