For experts, weak peso spells gains for PH
For some economists, the depreciation of the peso is not the bad news it is feared to be.
Three economists from the University of the Philippines (UP) and the University of Asia and the Pacific (UA&P) said the weakening of the local currency since the start of the year would boost household incomes, government coffers, and competitiveness of local industries. They believe the economy stands to gain from it on a net basis.
Benjamin Diokno, UP economics professor, said the weakening peso would drive an increase in the income of key sectors of the economy, including export, business process outsourcing (BPO), and manufacturers of goods used as import substitutes.
“The weaker peso, in the range of 44 to 46 against the US dollar, is definitely beneficial to the overall economy. It benefits a great majority of Filipinos,” Diokno told the Inquirer.
The weakening of the peso will also boosts incomes of households dependent on remittances of the over 10 million Filipinos working overseas. This is because depreciation of the local currency increases the peso value of the same dollar amount of remittances.
UP economics professor Ernesto Pernia said the disadvantage of a slightly faster inflation would be a small price to pay compared with the benefits of the peso’s depreciation.
“The weakening peso is a double-edged sword because it makes imports more expensive but makes exports more competitive. However, on a net basis, the benefits are greater than the cost,” Pernia said.
Pernia said as long as the peso stays below 50 to a dollar, any resulting increase in inflation could be manageable.
Victor Abola of the UA&P said that, apart from local industries and households, the government’s fiscal position would stand to gain from a weakened peso.
Based on Abola’s computation, the government will generate P23 billion more in additional revenue.
The peso, which closed at the 44-to-a-dollar territory on the last trading day of 2013, last month broke into the 45 level. Michelle V. Remo