Bangko Sentral to favor weak peso | Inquirer Business

Bangko Sentral to favor weak peso

Accommodative monetary policy seen to stay

Photo taken from https://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.

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“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.

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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.

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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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TAGS: Bangko Sentral ng Pilipinas, currencies, forecasts, Peso, Philippines

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