“Poor corporate sentiment is showing through, not just in potential capex decisions, but also in views on the currency, as per our recent conversations with onshore clients,” DB Research said in its latest Asia Strategy Outlook.
The analysis pointed out that companies have grown increasingly cautious, not only in their capital expenditure (capex) plans, but also in their outlook on the local currency. These concerns, it noted, reflect broader uncertainty over economic momentum and investment decisions heading into 2026.
The impact of this weak sentiment will unfold in phases, the forecast said. The first phase could involve renewed peso weakness next year as firms delay investment decisions and maintain defensive positioning. This pessimism may initially add pressure on the peso, especially as markets remain sensitive to shifts in global interest rates and domestic growth expectations.
The peso could even briefly breach the P60:$1 level if short-peso positions continue to build and sentiment deteriorates further, the report said.
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The peso fell to a new all-time low of P59.17 to the dollar in October, amid concerns over economic growth and a massive public works corruption scandal.
However, DB Research stressed that any peso depreciation may be temporary, with a recovery phase expected to follow as the country’s current account deficit narrows over the course of 2026.
The contraction in the deficit, the study said, will likely stem from reduced infrastructure and capex spending — factors that influence the current account balance, defined as the gap between national savings and investments.
Analysts also cited the funding structure of large infrastructure projects — many of which rely on official development assistance (ODA) and US dollar-denominated loans — as another factor that could help stabilize the country’s balance of payments. These inflows provide foreign exchange support that can help mitigate extreme volatility in the currency market.
“By late 2026, the peso is expected to strengthen and move closer to its estimated fair value of P57 to P58 per dollar, or even lower if the greenback weakens sharply in global markets and the Philippines’ current account deficit shrinks,” the report said.