THE PESO declined against the dollar on Wednesday as the government cut its growth target for this year and next, as the fresh spike in coronavirus disease 2019 (COVID-19) cases and the reimposition of strict restrictions cloud recovery prospects.

The local unit closed at P47.875 versus the dollar on Wednesday, dropping by seven centavos from Tuesday’s finish of P47.805, data from the Banker’s Association of the Philippines’ website showed.

The peso opened the session at P47.81 against the dollar. It dropped to as low as P47.894, while its intraday best was logged at P47.77 versus the greenback.

Dollars traded went up to $947.25 million on Wednesday from $925.20 million the day before.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the Development Budget Coordination Committee’s (DBCC) decision to slash the country’s growth outlook caused the peso to weaken versus the dollar on Wednesday.

In its 179th meeting on Tuesday, the DBCC downgraded its gross domestic product (GDP) growth target to 6-7% from the 6.5-7.5% outlook in December 2020. However, this would still be an improvement from the record 9.6% contraction logged in 2020.

“The emerging GDP growth projection is slightly adjusted to 6-7% from 6.5-7.5% in view of the emergence of new COVID-19 variants and the reimposition of enhanced community quarantine in the National Capital Region Plus area during the second quarter of the year,” the DBCC said in a joint statement.

Economic managers expect the economy to return to its pre-crisis level next year, with GDP seen to grow by 7-9%, lower than the previous target of 8-10%. The economy’s expansion is seen to slow to 6-7% in 2023 and 2024.

Mr. Ricafort added that the peso was also affected by the recent weakness in the local stock market, as well as global inflation concerns.

For Thursday, a trader said the market will watch out for the release of the minutes of the US central bank’s latest policy review.

“The local currency might move based on policy cues from the US Federal Reserve policy meeting minutes due to be released overnight as global investors will be looking for the US central bank’s assessment about the recent elevated US inflation reports,” the trader said.

Mr. Ricafort gave a forecast range of P47.82 to P 47.92 per dollar, while the trader expects the peso to move between P47.80 and P48.