The peso’s recent weakness isn’t a major economic concern given the Philippines’ relatively low foreign debt, London-based Capital Economics said.
The research firm, in a just-released report, noted that the peso — down by just under 4 percent against the greenback since the start of 2018 — was currently the worst performing emerging market currency.
The decline, it added, also comes at a time when the dollar has been depreciating against other currencies —as a result the peso weakened by even more in trade-weighted terms.
Nonetheless, “a low level of foreign currency debt in the Philippines means the recent weakness of the peso is not a major concern,” Capital Economics said.
It estimated that the country’s total foreign debt was equivalent to just over 30 percent of gross domestic product (GDP), relatively low compared to other emerging markets.
Capital Economics pointed out that countries hit by foreign currency debt crises typically had ratios of around 50 percent of GDP or more.
“In fact, despite the current worries about rising inflation, policymakers appear to be welcoming the boost to competitiveness the weak currency is providing to the country’s exporters,” it noted.
The research firm said it was important to remember that a weaker currency brings benefits too, most notably by boosting export competitiveness.
Authorities have made developing a competitive manufacturing sector one of their key priorities and a weaker currency should help, it added.
The Finance department, meanwhile, said the peso depreciation was far from a sign of structural weakness, even after the balance of payments turned negative.
“When the rate was at the lower end of the 40s, the peso was very strong that there were calls for its depreciation. We got what we have called for,” said Finance Undersecretary Gil Beltran.
He also stressed that the Philippines’ fundamentals were strong.
“At more than $81 billion, our reserves amount to more than 8 months of imports. That is significantly much larger than our reserves prior to the 1997 Asian financial crisis,” Beltran said.