By Justine Irish D. Tabile, Senior Reporter

The Philippines' weak peso is being driven by renewed geopolitical uncertainty and widening trade and current account deficits, highlighting the need for fiscal consolidation and a shift toward export-led growth, Economy Secretary Arsenio M. Balisacan said.

According to Mr. Balisacan, the renewed conflict involving Iran and the United States has pushed oil prices higher, adding pressure on the peso given the Philippines' heavy reliance on imported oil.

"We are so exposed to oil importation because we practically import all our oil. So that creates a lot of pressure on our peso," Mr. Balisacan told reporters on Thursday.

The peso breached the P62-a-dollar handle for the first time in August. On Wednesday, the currency tumbled by 16.5 centavos to close at an all-time low of P62.565 against the US dollar, breaking its previous historic trough of P62.4 recorded on Tuesday, according to Bankers Association of the Philippines data. A weaker peso raises the local-currency cost of dollar-denominated imports such as fuel and food, which can feed into consumer prices, while overseas Filipino workers' remittances, a longstanding pillar of the country's external position, gain value in peso terms.

Mr. Balisacan said, however, that the bigger and longer-term concern is the country's structural imbalance, with imports growing faster than exports.

"So our trade deficit, our current account deficit has been deteriorating. And that creates a lot of pressure. If you combine that with the external pressure, that is where we become a bit vulnerable," he said.

From January to July, the trade deficit widened by 29.2% to $37.34 billion from $28.91 billion in the same period a year earlier, even as exports rose by 12.9% to $54.92 billion.

The current account deficit, meanwhile, ballooned to $5.66 billion in the first quarter, equivalent to 4.8% of gross domestic product (GDP), from $4.2 billion, or 3.7% of GDP, a year earlier. For 2026, the central bank expects the current account deficit to reach $18 billion, or 3.6% of GDP.

Mr. Balisacan said the government needs to tighten fiscal policy, as spending above domestic savings increases the country's need for dollars to finance imports.

"When we are spending more than what we are able to save, then that is essentially saying that you are importing, you are a net importer and therefore you need more dollars," he said.

Over the longer term, the government seeks to diversify its sources of growth, particularly by developing manufacturing and export industries, the DEPDev chief said. The call reflects a long-standing feature of the Philippine economy, which has historically relied heavily on services and consumption rather than manufacturing exports, in contrast with several of its Southeast Asian neighbors.

"We should be able to develop our industries toward exports, making our industries more competitive," Mr. Balisacan said.

Improving competitiveness, he noted, would require addressing infrastructure gaps, the country's dependence on imported energy, and the ease of doing business. Energy is currently the biggest challenge, he added.

Mr. Balisacan said the government's fiscal consolidation efforts are already reflected in the 2027 National Expenditure Program, as growth in the proposed budget is slower than in the previous two years.

"We really need to tighten, but not at the expense of growth," he said, adding that the government should prioritize spending on education, health, social protection and infrastructure.

For infrastructure spending, the main issue is implementation, which the government is working to address, he said.

Mr. Balisacan also noted that the Philippines spends a larger share of its GDP than its neighbors, while its revenue generation is nearly at the same level.

"Because as you heard from the Department of Finance, if you compare our rate of spending, the proportion of GDP, total spending, it is higher compared to our neighbors. Whereas the generation level, the revenue, is almost the same as our neighbors," he said.

Asked whether peso volatility could cause the country to exceed the Development Budget Coordination Committee's (DBCC) import target for the year, Mr. Balisacan said this would depend on how long the external shock lasts.

"It depends on how long this external problem is. We hope stability will return to the Middle East," he added.

The DBCC projects goods imports to grow by 5% this year. In the first seven months, the country imported $92.26 billion worth of merchandise, an 18.9% increase from $77.58 billion a year ago. The total import value from January to July 2026 was the highest recorded since the series began in 1991, the Philippine Statistics Authority said.