BUDGET Secretary Florencio B. Abad has assured a stable peso rate at a range between 42 and 45 to a US dollar, despite the anticipated Federal Reserve (the Fed) increase in policy rates owing to the robust growth of the American economy this year.
Abad said that “domestic prospects” are firmly grounded to support a stable peso, despite the anticipated increase in the Fed on the account of the rosy forecasts on the US economy.
Abad, who chairs the Development Budget Coordination Committee (DBCC), said the “rosy domestic prospects,” such as stable remittances from overseas Filipino workers (OFWs) and rising investments from business-process outsourcing (BPO), will continue to buoy up a stable peso.
He added that the recommendation by the Bangko Sentral ng Pilipinas (BSP) that was adopted by the DBCC is “to retain the medium-term [foreign-exchange] assumption,” with peso range at 42 to 45 to a dollar in 2015.
A recent Reuters poll of 82 economists forecast US gross domestic product growing at an average 3.2 percent this year, the fastest since 2005. The optismism is expected to raise the Fed rate by 2015, as economists see the US economy’s fundamentals strong enough to outweigh the problems abroad, such as weakening Asian and European economies and the decline of crude-oil prices that has forced some businesses to either delay or cut back on capital expenditure.
“That level of [foreign-exchange] assumption will be kept up to 2018 as recommended by the BSP,” said Abad, adding that “the position of the BSP is that the peso may weaken but will continue to be stable.”
Some of the assessments presented to the DBCC, Abad said, include the peso-depreciation pressures to be triggered by capital outflows due to uncertainties in the global dynamics.
The global dynamic uncertainties include the anticipated hiking of the federal funds rate in 2015, as well as the monetary easing in European areas along with that of Japan.
But the budget chief said domestic prospects remain intact to ensure a stable peso buoyed by the steady remittances from OFWs and the continuing robust BPO earnings.
Abad added that the Philippine peso will remain stable amid the continuing increase in tourism receipts and the improving exports performance.
The series of investments upgrade on the Philippines, he said, “will also help [support a stable peso].”