Our economists may call this recent depreciation as a weakening of the peso, attributable to the US dollar’s recent strong performance but not necessarily to the weakening of the Philippine economy. Overall, though, the peso is much stronger compared to a few years ago.
The debate on whether a strong peso is a boon or a bane to the economy has cropped up since the local currency started rising steadily against the US dollar late last year. This is a debate that will likely linger unless of course the currency’s appreciation grinds to a halt and starts retracing its dismal performance in previous years.
If that time comes, then another debate will perhaps prop up: is a weak peso good or bad for the economy? Should the central bank intervene or let market forces dictate the currency’s movement? That is not to overemphasize the Filipino’s penchant for conflict; we Filipinos always have something to disagree about, whenever, wherever.
By portfolio, we mean investors in the stock and bond markets and other fixed instruments. They are the type that would easily come and go, depending on their perception of the economy and its competitiveness with other countries.
But the government is saying that in an economy that is just becoming attractive to investors, the first to come in are the portfolio holders, and only in the long run will direct investors be enticed to bring in their capital and resources. I certainly hope that such would be the case.
Meanwhile, inflows from Filipino workers overseas coursed through Philippine banks rose 25 percent to reach an all-time high of $10.7 billion last year, and would likely grow by 10 percent or even more this year as more Pinoys leave for greener pasture elsewhere.
Migration is not a phenomenon that has solely been induced by poverty and desperation because Filipinos who consider themselves world-class would always scout for opportunities overseas.
Their dollar remittances have given a new lease of life to our once ailing property sector, making every Filipino’s dream of owning a house and lot a reality. OFW money continues to sustain robust domestic consumption even as inflation and rising crude oil prices have been crimping economic growth.
Firms like SM and PLDT have a lot to be thankful for these overseas Filipinos; they continue to sustain the opening of more shopping centers and malls nationwide, and have even propelled the country’s largest telecoms firm to record net profits not comparable to any other Philippine company’s achievements.
The stronger peso has also been said to effectively reduce our debt level. The firmer local currency has likewise enabled the central bank to keep its benchmark overnight interest rates steady for the fifth straight month in March.
A steady monetary policy similarly has encouraged businesses to borrow from banks to finance expansion. It has encouraged more individuals to avail of personal loans either to buy a house or a car or buy new appliances. We‚ve seen some utilities bring down rates because of the peso’s appreciation. Last month, Manila Water said it was cutting down rates to reflect a lower currency-related charge.
However, even good news has its downsides.
Last week, the government said it has scaled down its GDP growth target this year to between 5.5 to 6.2 percent from the original goal of between 5.7 to 6.3 percent because of expectations that the export sector will not grow as fast as expected.
We also heard that the Bureau of Customs is not all too happy about the peso’s stellar performance as this would mean lower revenues for the government’s second-top revenue agency.
Some bankers are surprised about the Filipino’s extreme exuberance whenever the peso beats a high against the dollar, we truly are a people all our own. This is not the same attitude one would see elsewhere. China and Japan for instance would rather see their currencies undervalued because it means their products are becoming more competitive.
Foreign investors too prefer a steady if not weaker peso because this means they do not need to have such huge amount of dollars to invest in the Philippines.
In the sense that domestic consumption will continue to rise and a stable monetary policy will encourage increased borrowing and expansion among businesses, I guess the answer is a yes.
In the case of our exports, also considered a crucial pillar of economic growth, there are other ways of mitigating the strengthened peso’s effects, i.e., extending other incentives – both monetary and non-monetary – that would boost the competitiveness of Philippine products in the global market.
Let us remember that our exports have not been our major driver of growth even when the peso was not appreciating. There are a lot of factors other than the peso that could be attributed to the sluggish growth of our exports. Exporters have complained of many things, including unreasonably high power rates and not enough incentives from government.
So should we rejoice as the peso rises? Well, sooner or later it will seek its proper level. At this point in time, a strong peso is seen as good news. We might as well enjoy it.
What is the main thrust of the PEARL-2 program? Who are the local partners involved? What aspects of the program are lagging behind in terms of achieving the objectives? What factors are hindering the progress of the program?
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