The peso’s slide beyond P63 against the US dollar is threatening to drive up Philippine manufacturing costs and fuel inflation, raising concerns as businesses brace for stronger Christmas-season demand.
The Federation of Philippine Industries (FPI) warned that continued currency depreciation could squeeze manufacturers already exposed to rising import expenses, with potential knock-on effects on consumer prices.
FPI chairperson Elizabeth H. Lee said the weaker peso undercut many local factories margin since they source many of their inputs, including raw materials , components, and fuel, from abroad.
“Most factories rely on imported raw materials, components, machinery, and fuel, so peso depreciation raises production costs and adds pressure on prices over time,” Lee said.
The key concern is how long the peso remains weak. While daily exchange-rate swings are inevitable, Lee said the broader depreciation trend matters more to manufacturers planning production, managing costs and setting prices.
The pressure could reach consumers if manufacturers pass on higher costs. Companies that cannot immediately adjust selling prices may instead absorb the additional expenses, squeezing profit margins and limiting their capacity to invest or expand.
The timing adds to the risk. As demand typically strengthens ahead of Christmas, manufacturers could face a difficult balancing act: meeting higher orders while paying more for imported inputs.
Still, a weaker peso is not entirely bad news for industry. Export-oriented manufacturers could gain a competitive edge as their products become relatively cheaper for foreign buyers. Lee said Philippine industries must be prepared to seize those opportunities while managing higher production costs.
Relief could come from softer global oil prices. RCBC chief economist Michael Ricafort noted that Brent crude had declined to around $103 per barrel from $106, potentially easing some energy-related inflationary pressure.
But cheaper oil may not fully offset the peso’s impact on imported materials, equipment and other production requirements.
The broader economic risk is a squeeze from both sides: manufacturers face higher costs even as consumers confront the possibility of rising prices. Exporters may benefit from currency weakness, but that advantage will depend on their exposure to imported inputs and their ability to manage expenses.
With the Christmas shopping season approaching, the peso’s trajectory will be a key factor in determining whether manufacturers can absorb the cost shock—or whether more of the burden will ultimately fall on consumers.
