MORE people should fear rather than cheer the peso’s recent weakness, a senior economic manager said, citing the wide-ranging effects of inflation versus the benefits that reach only certain sectors.
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo refuted assertions that a weak peso would provide additional support for the Philippine economy.
Since the start of the year, the peso has lost more than 4 percent of its value against the dollar, with most of the decline coming in the last two weeks.
“A weak currency benefits certain sectors. But inflation hits everybody,” Guinigundo told reporters.
Among the winners from a weak peso are families that receive overseas Filipino workers’ (OFW) remittances, exporters and companies in the business process outsourcing (BPO) and tourism sectors. A weaker currency means more money in peso terms for every dollar these sectors earn.
University of Asia and the Pacific economist Victor Abola earlier estimated that as much as 75 percent of the economy could benefit from a weaker currency. OFW remittances and BPO revenues are the country’s biggest sources of dollar income.
Together, the two sectors contributed more than $40 billion to gross domestic product (GDP) last year. In 2016, this contribution will rise to a combined $50 billion, according to official projections.
Guinigundo, however, said there were still more companies in other sectors that stand to lose as the peso loses value.
“For importers of oil, raw materials, intermediate products, there will be a direct hit on their cost structure. Once there’s an issue there, there could be some impact on domestic inflation,” Guinigundo said.
The government’s own fiscal position may come under pressure as the peso weakens. The state has a sizable foreign debt stock, the cost of paying for which rises when the currency heads downward.
At the end of last year, the public sector’s total foreign debt stood at $39.3 billion or about a third of all the money the government owes, according to data from the BSP.