THE Philippines needs to limit its reliance on remittances and outsourcing revenues to prevent the peso from depreciating too much whenever uncertainties arise abroad, the Finance department said.
In an economic bulletin, Finance Undersecretary Gil Beltran said the peso — again back in P51 per dollar territory — was among the Asian currencies that had strengthened prior to the 2008 financial crisis.
The currencies of 12 Asian economies had appreciated by 9.3 percent from December 2000 to December 2007,
Beltran said, citing data from Bloomberg and Asian Development Bank.
The Korean won gained the most, by 26 percent, followed by the Thai baht (22.1 percent), Singapore dollar (16.9 percent), the peso (16.8 percent), the Indian rupee (15.7 percent) and the Malaysian ringgit (12.9 percent).
This was halted by the crisis and Beltran noted that nine years after, Asian currencies had depreciated by 14.6 percent.
With the Singapore dollar and the baht being the exception, he pointed out that rupee had fallen by 62.1 percent; the rupiah, 35.4 percent; Malaysian dollar, 27.2 percent; the peso 21.9 percent; and the won, 20.7 percent.
“Currency movements in Asia are a complex product of external and internal economic factors. But in the case of movements from 2008 to 2017, these are mostly accounted for by external factors, mainly the Fed QE (quantitative easing) policy,” Beltran said.
He said that said regression results showed that the US Federal Reserve policy actions were mostly to blame for currency movements from 2008 to 2013, with inflation accounting for less than 10 percent.
Compared to other Asian currencies, the Hong Kong dollar depreciated by just 0.1 percent from 2007 to September 2017. The Taiwan dollar, meanwhile, appreciated by 7.4 percent over the same period.
Beltran noted that Taiwan and Hong Kong had benefited from economic diversification, which limited the influence of external factors.
“This is what the Philippine economy aims to achieve in the medium term,” he said.
Remittances and business process outsourcing receipts account for inflows of around $50 billion annually, boosting the Philippines’ external payments position.
Last year’s $26 billion in remittances alone accounted for 10 percent of the country’s gross domestic product.
Economic managers have downplayed the impact of a weaker peso and Finance Secretary Carlos Dominguez 3rd has said the government would not intervene in the foreign exchange market.