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Weaker peso may be good for PHL economy–experts

DESPITE hard hits to bring the local currency to significantly depreciate in the previous week, a weaker peso may actually be what some sectors in the country need.

Several economists in separate commentaries and interviews said that the losses in the peso’s value against the dollar in the previous week may be beneficial for some sectors in the economy, particularly in giving consumer spending and the central bank’s foreign-currency reserves a boost during the period.

ING Bank Manila chief economist Joey Cuyegkeng said that the peso’s meantime bias toward the weakening side would “provide a lift to spending overseas Filipino workers’ [OFWs] families” in the near term.

This would happen, as the dollars sent by Filipino migrant workers would have a larger peso value during the period, giving more fuel to consumer spending in the country during the period.

Data from the central bank showed that OFW remittances send an average of $2 billion per month to the country.

This means that the $2 billion sent by OFWs in July this year would have a peso value of P90.53 billion at an average rate of P45.265 to a dollar in July, while the $2-billion remittances sent in August this year would have a peso value of P92.28 billion at an average rate of P46.142 against the US dollar during the month—altogether spelling a difference of P1.75 billion in a month’s difference.

Bank of the Philippine Islands (BPI) research officer Nicholas Antonio T. Mapa, meanwhile, said that the peso is still seen to maintain a weakening bias—as allowed by the central bank to depreciate.

“The peso will probably take its cue more from external factors. We do not see the US dollar to Philippine peso rate falling below P46 anytime soon, as the BSP could take the opportunity to replenish some of the foreign-exchange reserves they had sold in the market in the last three weeks,” Mapa explained.

The local currency hit is lowest point on Monday, when it shed about a third of a peso to near the P47 territory due largely to global developments, particularly in China.

Despite the depreciation, the peso has been found to be one of the least hit currencies in Asia during the global debacle.

This relative strength of the currency—as compared to its neighbor countries’ money value—is said to be one of the possible reasons for the sustained fall in inflation in recent months, the Singapore-based DBS Bank economist Gundy Cahyadi said.

“Strong foreign remittance flows have been supporting the peso amid the recent bouts of financial-market volatilities,” Cahyadi added. 

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