More winners than losers with weak peso

The economic managers of the Duterte administration are comfortable with the current weakness of the peso against the dollar, saying the downtrend no longer has the same inflationary impact on the economy as before.

Speaking to reporters ahead of the weekend, Finance Secretary Carlos Dominguez III explained that economic managers were instead closely monitoring the rate of decline of the currency to make sure that market-dictated movements were contained within acceptable norms.

“We do not manage the exchange rate,” said the finance chief, who also sits in the Bangko Sentral ng Pilipinas’ seven-member Monetary Board—the body ultimately responsible for setting policies that affect the currency. “The exchange rate is determined by the market. Instead, we manage inflation, and that is done through our central bank.”

Unlike previous central bank chiefs, BSP Governor Nestor Espenilla Jr. has adopted a largely free market stance against the currency, surprising financial markets that have grown accustomed to the regulator’s close supervision of the exchange rate in past years.

Dominguez pointed out that in monitoring the prices of goods and services in the economy, policy makers found that a weak peso no longer generated the same level of inflation as it used to do.

“In the past, the exchange rate impacted inflation rate almost immediately,” he said. “But it no longer does. We are a much larger economy and much more diversified. The economy is very different from what it was in the 1990s.”

Dominguez pointed out that even sharp spikes in petroleum prices—like those experienced over the past 12 months—no longer affected the inflation rate as much, thanks to a more robust economy. —DAXIM L. LUCAS