Bangko Sentral to favor weak peso

Accommodative monetary policy seen to stay

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Photo taken from http://www.bsp.gov.ph

The Bangko Sentral ng Pilipinas is seen favoring a weakening of the peso against the dollar following the double-digit decline in export receipts and the higher jobless rate posted by the country in April.

In a research report issued on Tuesday, Citigroup said an accommodative fiscal and monetary policy would likely remain while the BSP’s bias for a weak peso would persist with the bleak export outlook. In April, export receipts fell by 12.8 percent year on year compared to the 0.1 percent decline in March.

“Despite an easing technology downside, non-technology exports of manufactures could fall by 2.1 percent in 2013 based on updated monthly extrapolations (versus 39.5 percent growth in 2012). Supply chain effects can mitigate the non-tech decline but strong export gains this year may not materialize,” Citigroup said in a research.

In a separate report commenting on the increase in Philippine unemployment rate to 7.5 percent in April from 6.9 percent a year ago, Citigroup said policy or special deposit account (SDA) rate cuts would cure neither a broad-based downside in external demand nor the weakness in farm employment.

“Weak Philippine peso is a better option since it enhances price competitiveness of local agro-based products in global markets, which would bode well for local farm production and employment. Accelerated implementation of rural-based infrastructure—roads, bridges, irrigation and electrification—would address festering structural issues in the farm side,” the research said.

The peso closed at 43.20 against the dollar on Tuesday, depreciating from 42.78 on Monday.

Philippine financial markets were closed on Wednesday due to a national holiday.

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  • jimboalba

    You sing for a stronger peso then now you sing for a weaker peso? Isn’t that retarded?

  • FreeMarketEconomist

    A common misconception is that OFWs will benefit when they exchange their dollars for more pesos due to inflation. If this is true, what’s stopping the central bank from printing more Philippine money and getting us to 1$:100P? How about 1$ to 1000Pesos?

    OFWs that earn 10$ can exchange that for P10,000! Amazing! That will make all OFW millionaires in no time!

    All economies that implemented such foolish financial policies got busted. History has proven this time and again. The Roman Empire, the Byzantine Empire… the US economy… our economy.

    Common guys, this is basic economics.

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