Weak peso not at all bad for Philippine economy

CEBU, Philippines - A local bank executive said the weakening peso against the dollar is not bad at all for the Philippines whose economy significantly depends on remittances sent home by Filipinos working overseas.

In a phone interview yesterday, Cebu Bankers Club past president Maximo Eleccion said the dollar continued to gain strength due to the recovering US economy but it doesn't necessarily mean the peso is weak.

In early trading yesterday, the peso touched the P49-per-dollar level, to its lowest in nearly eight years since 2009 at the height of the global financial crisis. 

On Friday, the local currency closed at P48.95 against the dollar.

Week-on-week, the peso also grew weaker compared to its P48.48 close on November 4.

The dollar rally is seen to sustain amid uncertainties in the global market.

Eleccion, a relationship manager at BPI, said that a weak peso will actually increase the competitiveness of the country’s exports and increase the spending power of Filipinos families who depend on OFW remittances.

Government data would show that the US accounts for around a third of annual overseas remittances with more than 3.5 million Filipinos living and working there.

It will also have an impact on business process outsourcing (BPO) revenues, he said.

Eleccion quoted the projection of economists at BPI that the peso-to-dollar exchange may reach the P50 level in early 2017.

But the bank official warned that it may not be good also of the conversion rate goes up further as it will bound to affect imports.

If that happens, imports sold locally may increase in prices, thus eventually affecting inflation rate, he said.

In an earlier statement, Finance Undersecretary and Chief Economist Karl Kendrick Chua said that while the peso has moderately depreciated in nominal terms in recent weeks, the peso in real terms is still very strong which deters competitiveness.

 The Department of Finance had said the peso is just seeking its appropriate value, given that it has appreciated significantly in previous years.

 Chua said the currency's depreciation was in sync with the global currency market performance.

 He said the peso's downward trend against the greenback was matched by the Japanese yen's 2 percent and was even tamer than Australian dollar's 2.2 percent, Malaysian ringgit's 3.5 percent and the pound's 2.7 percent.

 He said it is important to be prudent to ensure that volatilities are managed.

In its previous forecast, Credit Suisse Group AG predicted the peso to drop to 50.3 by March next year.

In afternoon trading yesterday, the peso was at P48.908 against the dollar. (FREEMAN)