Economist: RP posts real gains

Despite a never ending series of political shocks and threats to price stability and income growth, an economist presented that the Philippines has indeed posted real gains in these past years.

Emilio T. Antonio, president of the Center for Research and Communication Foundation, Inc. and the former Dean of the School of Economics of the University of Asia and the Pacific said that the Philippine economy’s gains are supported by improvements in our cash position, income-spending balance and access to other people’s money.

He said that through accelerating the growth of production and stabilizing prices of goods, funds and foreign currencies and labor, the economy has indeed posted real gains.

Antonio said that the peso’s strength is not only due to the weakness of dollars as it is also in fact gaining strength against yen and Euro.

“Peso price of dollar has dropped, peso prices of other currencies have also dropped; as a whole, foreign currencies have become cheaper in terms of pesos. This shows that peso did not only get stronger against the dollar but it also gained strength against other currencies,” said Antonio.

He said that peso is strong as a result to the improved supply of dollars due to the country’s improved income-spending balance, building up of the international reserves and the improving attractiveness to foreign lenders and investors.

“This has reinforced the traditional bias for cheaper dollars and fanned expectations that the peso-dollar rate will continue to drop. In short, fundamental plus perceptions drove down the price of dollars,” he explained.

He pointed out though that on the whole, cheaper foreign currencies does not likely yield benefits to the economy as part of the revenues earned by the country is denominated in foreign currencies such as our exports and OFW remittances.

Part of the costs the country incurs is also denominated in foreign currencies such as fuel and imported raw materials.

“When peso-dollar rate drops, both peso revenues and peso costs from dollar denominated transactions drop,” he said.

A strong peso weakens the economy as the cost of production of exports in dollar terms increase which makes it difficult for exporters to sell at the dollar price required by the world market, he added.

Also, a strong peso makes prices of imported goods drop making it difficult for locally produced goods to compete.

Antonio said that the peso-dollar rates are probably incorrect as our imports are still higher than our exports.

For the first semester, the National Statistics Office recorded balance of trade in goods (BOT-G) of $3.934 billion deficit as total export receipts grew by $25.598 billion but the total imports was at $29.532 billion.

“Unfortunately, strong currency is eroding our strength and this is a repeat of historical patterns but we need not be as disastrous as the past,” he said.

Right now, aside from the strength of peso, threats lurking the country’s economic position are price stability due to oil price hikes, rise of prices in agricultural products such as rice as well as threats to income growth such as current recessions in the United States.

However despite these threats, Antonio’s outlook for this year remains positive but he said that a cloud is gathering for 2009 and beyond.

“Don’t lose your focus on business opportunities as the economy can still expand despite these threats, positioning is the key,” he advised. —Rhia de Pablo