Philippine peso 49.7% undervalued against us dollar (if based on big mac prices)

The Economist’s Big Mac Index is based on the theory of purchasing power parity (PPP), which states that in the long run, the exchange rates of any two economies should move towards the rate that would equalize the prices of an identical basket of goods. Using this approach for a Big Mac, one can estimate how much one currency is under- or overvalued relative to another. As of January 2024, a Big Mac costs $5.69 in the US compared to P161 in the Philippines, implying an exchange rate of P28.30 versus the dollar. Compared to the actual exchange rate of P56.30, this means that the peso is 49.7% undervalued.