Corruption emerges as hidden driver of Philippine peso weakness

The Philippine peso's sustained decline against major currencies reflects not only external economic shocks but also deep domestic vulnerabilities, according to emerging research that places corruption at the center of the currency's weakness.

While economists have long attributed peso devaluation to high import dependence, rising debt service obligations, and weak industrial competitiveness, a new analysis reveals that corruption operates as a significant but largely unquantified accelerant of currency depreciation. The research estimates that ₱8.8 trillion was diverted through corrupt practices between 2016 and 2025, representing a substantial drain on the economy's productive capacity.

The findings suggest that corruption undermines peso strength by eroding investor confidence, reducing government revenue available for economic stabilization measures, and distorting resource allocation away from productive sectors. This structural weakness compounds the currency's vulnerability to external pressures, including global inflation, tightened monetary conditions, and supply chain disruptions.

The identification of corruption as a hidden accelerator of peso devaluation adds urgency to ongoing anti-corruption efforts and suggests that addressing institutional weaknesses may be as critical as managing macroeconomic policies in stabilizing the currency. Policymakers face the dual challenge of tackling both external economic headwinds and internal structural impediments to maintain monetary stability.