Weak peso ‘good for the country’ – lawmaker

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A lawmaker on Saturday opined that the depreciation of the peso against the US dollar can be seen as a boon for the country.

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“A weak peso is good for our exporters who earn in dollars. It is also beneficial to our overseas workers and their families here. It is likewise helpful to our booming and highly labor-intensive outsourcing sector that generates income in dollars,” Rep. Johnny Pimentel of Surigao del Sur said.

Pimentel, a member of the economic affairs panel of the House of Representatives, said the depreciation is generally favorable “as long as the peso’s decline is driven by market forces and the rate will not drop huge[ly]and sudden[ly].”

The peso is now hovering at a seven-year low, closing at P48.23 against the US dollar on Friday.

“It is foolish to attribute the peso’s recent weakness to the purported political volatility created by President Duterte’s outbursts against Western powers,” Pimentel said.

Two weeks before Duterte assumed office, the chief economist of the Bank of the Philippine Islands reported that the peso will most likely hit P50 per dollar level before the end of the year as the US Federal Reserve prepares to start raising interest rates.

“Actually, the peso is not fundamentally weak. The dollar is simply gaining relative strength because there is growing expectation that after years of zero interest rates, the US Federal Reserve will soon start raising rates,” Pimentel said.

He said that the US Federal reserve is expected to jack up interest rates shortly after the November 8 elections in America or before the end of the year.

“Owing to this anticipation, investors around the world, including Filipinos by the way, are starting to park some of their money in dollar-denominated assets, thus, the rising need for dollars. And as the demand for the dollar increases, its value also climbs against other currencies, including the peso,” Pimentel noted.

The lawmaker noted that the peso’s mark down would provide multinational business process outsourcing (BPO) firms operating in the Philippines additional incentives to expand their operations in the country.

“Like exporters, BPO firms in the country sell their services to overseas clients. They generate revenues in dollars, but spend for their operations here, including the wages of their employees, in pesos,” the lawmaker added.

Based on data from the Philippine Dealing System, the peso averaged P42.44 to a dollar in 2013; P44.39 in 2014; and P45.50 in 2015.

From January to September 2016, the peso has so far averaged P46.95 to a dollar.

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3 Comments

  1. Here’s the definition of Inflation rate via wikipedia

    When the price level rises, each unit of currency buys fewer goods and services. Consequently, inflation reflects a reduction in the purchasing power per unit of money https://en.wikipedia.org/wiki/Inflation.

    I assume you don’t eat in a restaurant or you don’t have a vehicle that needs fuel.

    Please enlighten me in your understanding of inflation rate.

  2. A cheap peso does benefit the BPO and exporters. But Rep. Johnny Pimentel forgets that
    1. raw materials for export are bought in Dollars and the finished products are exported based on cost
    2. higher inflation rate
    3. Worst of all, higher cost in paying our external debt which by now increased by 5%
    4. Higher oil price due to devaluation resulting to increase in prices of services and commodities
    Saan kaya siya kumukuha ng information nya? Sa FB?

    • A weak peso is both good and bad. It’s bad for those who import from US. It’s also bad for those who consume goods that are bought in dollars.

      I really LOL’ed when you mentioned inflation rate. I don’t get the connection aside from an increase of prices of goods associated with goods imported in the US or using dollars. And there’s a price freeze on basic commodities going on so it only hurts the rich big companies that depend on imports that use dollars.
      The importers already benefitted on the crash of dollar due to recession so let’s just accept that this is the time that the dollar is now recovering.

      You’re obviously ignorant in economics.
      Pareho lang kayo ni Pimentel, biased. Mas malala ka pa dahil you’re igno in many things. Don’t act like you are smarter than them