Peso recovers at 43.46:$1; but may fall further

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The Philippine peso recovered on Tuesday as it closed P43.46 to a dollar.

The local currency improved 38 centavos from the 43.84 close on Monday.

However, despite the stronger close, the peso is still at the P43 to a dollar level, which
reflects that it is in a depreciating level.

According to Socioeconomic Planning Secretary Arsenio Balisacan, peso depreciation may have an affect on basic commodities.

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“Of course [there would be an effect]for those things that we import . . . Even the purchasing power of our remittance recipients would also gain from that. It would push some pressure in the commodities. But I would not expect it to be significant at this point,” Balisacan, who is also the National Economic and Development Authority director general, said.

He added that weak peso is also good for exports and the local industry because it will result in a more local production that will create jobs.

In terms of the impacts of financial volatility, Balisacan said that the Philippine economy will not be affected since its macroeconomic fundamental remains okay.

“The real sectors of the economy are not really as vulnerable as it used to be in past few decades,” he said.

On the other hand, a think tank said that foreign direct investments (FDI) are needed for a strong stock market and stable peso.

In a statement, advisory and research consultancy group Stratbase Research Institute said that the recent fall of Philippine stocks and the peso amid the uncertainty in the global economy highlights the need for the Philippines to attract job-generating FDIs to achieve inclusive economic growth.

According to professor Victor Andres Manhit, president of Stratbase Research Institute, the financial market reflects investor confidence, and the best protection for stock investments is solid economic growth fueled by job-generating investments.

He said that despite the Aquino administration’s inclusive growth strategy, the economic growth over the past two years was described by many as “jobless growth.”

“A key indicator in this regard is employment and job statistics suggest that all may not be too rosy still for the country,” he said.

Manhit said that economic growth in recent years was driven by remittances and consumer spending, and not by investments and manufacturing.

He said that the manufacturing sector shrank in 2012 to its lowest level, as a percentage of the economy in 60 years, while the agriculture sector is now just a tenth of the gross domestic product.

“All the basic economic sectors, except services, are not being as productive. In a country whose poorest and most of the population are tied to and dependent on agriculture, fisheries and manufacturing, this should be a most alarming concern,” Manhit said.

He said that the recently held elections provided an opportunity to advance economic reforms to encourage more investments in manufacturing and agriculture.

He said the with increased influence of President Benigno Aquino 3rd over the Senate and the House of Representatives, the country’s chief executive “now has a greater opportunity to address pending issues on reforms that will increase investments, directly generate jobs and sustain the economic momentum.”

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