MANILA, Philippines (UPDATED) – The Philippine peso depreciated to P52.12 against the United States dollar on Wednesday, February 14, its weakest performance in over 11 years, as a surge in imports led to record trade deficit.
The local currency shed 14 centavos on Wednesday, closing at P52.12 to $1. This was from the previous day's P51.980 to $1.
The Philippine peso had opened at P52.03 against the greenback on Wednesday, and hit an intraday high of P52.12.
It was on July 21, 2006 when the local currency hit the P52.16 to $1 territory. (READ: Peso depreciation: Should we be worried?)
"Strong economic growth in the Philippines is fueling a surge in imports, resulting in record trade deficits," Khoon Goh, head of Asia research at ANZ Banking Group (Singapore), said on his Twitter account.
"Further peso weakness [is] likely, as the current account balance, which was 4% of GDP (gross domestic product) in surplus a couple of years back, slips further into deficit," he added.
'Not a weak economy'
The Philippines posted its largest trade deficit on record for a single month in December 2017 when it reached $4.017 billion.
This brought the gap to another record high of $29.8 billion in full-year 2017, from the $26.7 billion recorded in 2016.
The balance of trade impacts the currency exchange rates through supply and demand.
For instance, if the Philippines exports more than it imports, there is a high demand for its goods and for its currency.
But when it imports more than it exports, there is a relatively lower demand for its goods and hence for its local unit.
For Budget Secretary Benjamin Diokno, the Philippine peso's further depreciation does not indicate a weak economy.
"Every currency is weakening vis-à-vis the dollar. In fact, relative to other countries, we are okay. It is wrong to say that a strong peso means a strong economy. That's false," Diokno said in a press conference.
"We need a competitive peso, not strong peso," Diokno told reporters. – with a report from Aika Rey / Rappler.com