Peso strength hurts local manufacturers

CEBU, Philippines – Although hopes are up for a possible export market recovery, especially in the gifts, toys and houseware or home furnishing products in the second half of this year, manufacturers still feel the brunt of the strengthening of the peso against the greenback.

Gifts, Toys and Houseware Exporters Association (GTH-Cebu) past president Jenifer Cruz yesterday said that unless the Bangko Sentral ng Pilipinas (BSP) will properly manage the foreign-exchange movements, exporters will remain battered by the fact that they cannot expand and take advantage of the recovering export market.

"Buyers will continue to buy. There is an improving market, although consumers are now more conservative than before. But with the strengthening of the peso versus the US dollar our bottom line will suffer. No money to expand and market our products abroad," Cruz told The Freeman yesterday.

According to Cruz, despite the industry's constant call for BSP to intervene the movement of the currency to protect the dollar earning industries, still exporters specifically are suffering with too many issues.

"We are running out of ideas and we hope that there will be a regional effort from among the central banks in Asia to counter this issue. Exporters in Asia are also affected except for China and Vietnam," Cruz said.

The Philippine peso value now hovers within the P43 versus one dollar level, Cruz hopes BSP will look at the exporters' side on this matter, and see a good solution on the further strengthening of the peso.

On the other hand, BSP governor Amado Tetangco earlier defended that the peso appreciation is in the middle of the range compared to the fluctuations of other currencies in the Asian region.

"I think we have to remember that exchange rate is only one of the factors that affect [exporters] competitiveness, although it is the most visible," the BSP governor said.

Tetangco instead challenged Filipino exporters to seriously impose efficiency in the respective company operations in order to compete.

"We [BSP] maintained our appreciation in line with other currencies in the region, even not as much as Malaysia and Singapore," Tetangco said.

However, economists believe that the Philippines can well protect its dollar-earning industries by adopting a good alternative to effectively manage the movement of the country's foreign exchange.

Nicolas Kwan, Standard Chartered Bank's head for research-East, the Philippines does not need to appreciate the peso too much, as the market forces' unpredictable and abrupt fluctuations could disrupt businesses, especially the export sector.

The BSP which follows a system that gives freedom to the peso value versus the US dollar based on the market forces, could in other way manipulate the up and down swings, other ways such as controlling the management of equity market, and bank inflows.

In some economies, like Australia, New Zealand, including the Chinese Central Banks, they were able to control the movement of their foreign exchange, in order to minimize the fluctuations and protect businesses, and the economy as a whole.

Kwan said although BSP is following different policies as other countries, "it does not mean they can't manipulate the movement of the peso." (FREEMAN)