Finance exec says peso weakness a welcome dev’t

Amid strong economic fundamentals, there is no need to worry about the weaker peso, the Department of Finance said.

“Far from being a sign of structural weakness in the economy, even as the balance of payments turned negative, the peso’s depreciation is a welcome development. When the rate was at the lower end of the 40:$1 level, the peso was very strong that there were calls for its depreciation. We got what we have called for,” Finance Undersecretary and chief economist Gil S. Beltran said in an economic bulletin.

Beltran was referring to the concern of exporters back then that Philippine exports lose competitiveness when the peso was stronger than the US dollar.

The peso weakened to 52:$1 in mid-February even as the Indonesian rupiah, the Malaysian ringgit and the Thai baht strengthened against the greenback, Beltran noted, citing International Monetary Fund data.

But Beltran pointed out that “our fundamentals are strong.”

For instance, “at more than $81 billion, our [dollar] reserves amount to more than eight months of imports,” Beltran said, referring to the country’s gross international reserves, which the latest Bangko Sentral ng Pilipinas data showed at $81.2 billion as of January, covering 8.2 months’ worth of imports.

“[It] is significantly much larger than our reserves prior to the 1997 financial crisis,” Beltran noted.

However, BSP data showed that the balance-of-payments (BOP) position in January stood at a deficit of $500 million, although narrower than end-2017’s $900-million deficit.

The BOP is a summary of all the businesses the country does with the rest of the world.

BOP data are tracked closely to ensure that the supply of dollars in the economy remains ample to allow the government as well as businesses to transact with the rest of the world. —BEN O. DE VERA