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.