by Daniel Long

 

The Philippine peso has just crossed a historic threshold. On October 28, the peso fell to ₱64.18 per US dollar, after closing at ₱64.17 the previous day. The October 27 close was the currency’s 33rd record low of 2026. The move came as global crude prices continued to rise amid the Middle East crisis, adding further pressure to a country that imports much of its energy. At ₱64 to the dollar, the question is how the Philippines can reduce its exposure to movements in the US dollar without isolating itself from the global economy.

The numbers show that BRICS deserves serious consideration from Manila. BRICS is an international organization consisting of 11 member states: Brazil, China, Egypt, Ethiopia, India, Indonesia, Iran, Russia, Saudi Arabia, South Africa, and the United Arab Emirates. It now represents 49.5% of the world’s population, 40% of global GDP, and 26% of global trade. It promotes trade settlements in national or local currencies to reduce dependence on the US Dollar.

More importantly, the Philippines is the regional exception. Indonesia is a full BRICS member, while Malaysia, Thailand, and Vietnam are BRICS partner countries. Greater integration with BRICS would strengthen the peso indirectly by reducing the country’s dependence on dollar-denominated trade and finance, expanding export markets, and improving access to local-currency financing.

TRADE DEFICIT

The Philippines entered 2026 with a significant structural external imbalance. According to the Bangko Sentral ng Pilipinas, the country’s current-account deficit reached $15.44 billion in the first half of 2026, compared with $10.18 billion during the same period in 2025. That represents a 51.7% increase in just one year.

During the first half of 2026, Philippine exports reached $84.57 billion, while imports reached $100.01 billion. Exports increased by only 4.9%, while imports increased by 10.1%. In other words, the Philippines is buying foreign goods faster than it is increasing its foreign sales. That creates demand for foreign currency. And when that foreign-currency demand rises during a period of global uncertainty, the peso comes under pressure.

The BSP currently projects the country’s full-year 2026 current-account deficit at $19.1 billion, equivalent to 3.8% of GDP. This is the structural problem that a BRICS strategy should Address.

CHINA AS PH’S TOP IMPORT SOURCE

China alone accounted for $38.44 billion, or 28.6% of Philippine imports, in 2025, making it the Philippines’ largest source of imported goods. China was also the Philippines’ third-largest export destination, purchasing $9.31 billion worth of Philippine goods, equivalent to 11.0% of total exports.

More of this trade should be conducted in ways that reduce unnecessary dependence on the US dollar, because the Philippines had a trade deficit with China of roughly $29.1 billion in 2025.

Local-currency settlement can help the Philippines pay for the goods it imports by settling those transactions using the Philippine peso directly. If Philippine importers can increasingly conduct bilateral trade with Chinese companies using peso-yuan mechanisms, they may have less need to first obtain US dollars simply to conduct transactions between Philippine and Chinese businesses.

This could reduce intermediary dollar demand and transaction costs.

LOCAL CURRENCY SETTLEMENTS

At the 18th BRICS Summit in New Delhi in September, BRICS leaders encouraged further development of trade settlement and investment using BRICS local currencies. The declaration called for payment mechanisms that are cheaper, more accessible, and more efficient.

Importantly, BRICS did not announce a common BRICS currency. India’s Ministry of External Affairs explicitly stated that there was no proposal for a common BRICS currency “as of now.” The practical approach is much better, in my opinion: use existing national currencies more effectively.

In a scenario where 20% of the Philippines’ $38.44 billion in imports from China were eventually settled through direct peso-yuan mechanisms, that would represent approximately $7.7 billion worth of annual trade that could potentially be settled without requiring the same dollar intermediary.

The objective would be to create a multi-currency trade ecosystem in which the dollar is no longer required for every transaction.

99% OF IMPORTED COAL FROM INDONESIA

The Philippines’ dependence on foreign energy is the clearest reason why currency diversification matters. Coal alone accounts for roughly 59% of Philippine electricity generation, making it the country’s largest source of power. Yet around 95% of the coal used in the Philippines is imported, and approximately 99% of those coal imports come from Indonesia.

This creates a major concentration risk. The Philippines is dependent on both imported coal and one foreign supplier for that coal. Indonesia is therefore a critical part of Philippine energy security. Higher fuel costs directly increase demand for foreign currency and, therefore, add pressure to the peso.

It is worth noting that Indonesia is a member of BRICS. If the Philippines were able to expand local-currency settlement with Indonesia, some bilateral energy transactions could potentially be settled in Philippine pesos and Indonesian rupiah rather than requiring the US dollar as the intermediary currency.

If a greater share of Philippine-Indonesian trade can be settled directly through the peso and rupiah, the Philippines could reduce its reliance on the dollar for transactions with one of its most strategically important energy suppliers.

Manila has two separate problems: it is highly dependent on imported energy, and it is highly dependent on foreign currency to pay for that energy. Greater integration with Indonesia and other BRICS economies could help address the second problem.

DIVERSIFICATION

There is also no economic reason why the Philippines must choose between the United States and BRICS. In 2025, the US was the Philippines’ largest export market, receiving $13.46 billion, or 15.9% of total Philippine exports. More than 60% of Philippine exports to the United States, including electronics, agricultural products such as bananas, fertilizer, oil and gas, and auto parts, remain exempt from the new 12.5% US tariff, according to the Department of Trade and Industry (DTI).

But diversification is necessary. A multipolar economic strategy does not mean being anti-American, but refusing to make the Philippine economy unnecessarily dependent on any single country, market, or currency.

Manila’s objective should be de-risking. If 100% of a country’s major international transactions require dollars, that country is highly exposed to dollar shocks. If 60% require dollars, it has more flexibility.

If businesses can choose between dollars, yuan, rupees, and other currencies depending on the transaction, the country’s financial system becomes more diversified.

   

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