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THE
Philippines plans to sell bonds to nationals working
overseas as it seeks to curb gains in the peso that are
threatening to slow economic growth, chief economic
planner Augusto Santos said.
The
state-run Land Bank of the Philippines will sell peso-
and dollar-denominated bonds,
Santos
said in an interview. The bonds aim to protect the value
of earnings of nationals abroad and dissuade them from
increasing foreign-currency remittances, Santos said.
Details
of the bond sale are being worked out by Land Bank,
Santos said. The peso climbed 19 percent last year,
prompting the government to borrow more in pesos and
reduce foreign-currency loans to limit the inflow of
dollars. The currency is trading higher than the P42 to
P45 per dollar average “equilibrium’” that Santos said
is needed to sustain the fastest economic expansion in
three decades.
“As
overseas workers’ purchasing power declines locally,
they tend to send in more dollars to compensate and that
will further aggravate the situation,” Santos said in
the January 11 interview. “The strong peso is weakening
our exports. That will weaken growth.”
Gross
domestic product probably expanded 7 percent last year,
Santos said. That’s the fastest pace since 1976,
according to data compiled by Bloomberg. Slowing
exports, rising fuel prices and a possible recession in
the US may cool this year’s economic growth to between
6.3 percent and 7 percent, he said.
Exports,
which account for two-fifths of the economy, fell 2
percent in November and will miss the government’s
11-percent full-year growth target for 2007, Santos
said. A stronger peso could prevent the government from
achieving its 2008 target of expanding exports by 8
percent, he said.
“If the
peso further strengthens, there won’t be much incentive
for workers to go abroad,” contributing to unemployment,
Santos said.
Remittances, equivalent to a tenth of the economy, help
pay for mobile phones and homes in the
Philippines.
The nation’s unemployment rate of 6.3 percent is the
second-highest behind Indonesia among Southeast Asian
economies tracked by Bloomberg.
“It’s
really a tough balancing act,’”
Santos
said. “The peso will continue to maintain its strength
as we don’t see a let-up in remittances.”
The
peso’s 1.7 percent gain this year is the most among
Asian currencies, according to data compiled by
Bloomberg. |
