Philippines: New confirmed daily cases (Covid-19), June 24 2020 In fact, although economic activities have been restarting in the country since early June, after more than two months of lockdown, contagions are showing an upward trend, even if the figures are much lower compared to the most affected countries. However, it appears that this might be the latest cut in 2020, precisely because the central bank governor seems intent on maintaining positive real interest rates.Ĭentral bank support is deemed necessary because uncertainty about the health crisis and its economic consequences is still high. The rate was reduced by 50 basis points to 2.25%, bringing the overall reduction since the beginning of the year to 175 basis points.
reduction of the current account deficit in April, due to the contraction of foreign trade related to the pandemic.įocusing on monetary policy, yesterday's Bangko Sentral ng Pilipinas (BSP) cut its benchmark interest rate to support the economy in the post-Covid phase, mitigate downward risks to growth and support market confidence. willingness of the central bank to maintain positive real interest rates, which represent an element of attractiveness for foreign investors and consequently a support for the peso. presence of an adequate amount of foreign exchange reserves (almost $74 billion in April). recent capital inflows linked to government borrowing from abroad, as reported by ING. 
general context of improving risk sentiment. Since the beginning of June, the peso has strengthened by 0.7% against the dollar, a trend that is in line with other Southeast Asian currencies, which in turn are recovering from the effects of the Coronavirus: in June, the Thai baht recovered 2.3 percentage points against the dollar, the Malaysian ringgit 0.9% of its value.įocusing on the case of the peso, according to analysts several factors may have supported the currency during this period: 
As can be seen from the graph, the depreciation of the currency during the period of maximum Covid-related market volatility was relatively limited: the peso lost just over 2% of its value against the dollar in mid-March, to then recover shortly afterwards and strengthen in recent months.
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