The peso’s recent movements are consistent with monetary policies aimed at fostering sustained economic growth, the Bangko Sentral ng Pilipinas (BSP) said.
“Pursuing a flexible and adaptive exchange rate policy enables the BSP to keep its interest rate policy settings squarely focused on achieving the inflation target while dampening consumption and supporting a more investment- and export-led growth that the economy needs to sustain its strong momentum over the long haul,” central bank Governor Nestor Espenilla Jr. in said a message to reporters on Monday.
The peso fell to near 11-year lows last week, trading in P51 to the dollar territory, due to factors such as the prospect of war on the Korean peninsula.
It lost 14 centavos on Friday to close at P51.49:$1, its weakest since settling at P51.60:$1 on August 24, 2006. Several analysts say it could fall to the P52:$1 level before the end of the year.
Some commentators, Espenilla noted, are judging the state of the Philippine economy merely on the basis of the peso’s depreciation.
“In particular, the peso is compared in [an]unfavorable light against ‘stronger’ regional currencies. That’s a rather simplistic way to look at it,” he said.
The better way to gauge the economy is to evaluate its progress toward delivering things that ultimately matter to the people, the Bangko Sentral chief claimed, such as low inflation, growth and jobs.
Economies, Espenilla pointed out, have their own unique challenges that require policies suiting circumstances and needs.
He said the Philippines was doing the correct thing in prioritizing investment-led economic growth, adding that allowing the peso to gradually depreciate to a more appropriate level was fully consistent with that strategy.
“However, the BSP is very mindful that such adjustment may create market uncertainty if not well explained. So we communicate and explain,” he added.
Espenilla also said that monetary authorities would go after speculators wanting to take advantage of the situation.
“The BSP will not tolerate such speculative behavior and stands ready to use its very ample international reserves and deploy its full policy and regulatory arsenal if necessary,” he said.
In any case, the peso has now sufficiently adjusted and can be expected to regain relative stability going forward, he added.
“This soft landing is reinforced by effective discipline in fiscal management and a well-designed and well-executed public investment program,” Espenilla said.