A few years back, my former student in Economics who joined the ranks of overseas Filipino workers was in a quandary because of his professional thoughts regarding his earnings as an OFW. Though the income remains fixed at a certain point as far as his host country is concerned, this remains variable in the home country, just like any worker of his nature. It is very technical for an ordinary person to even realize that the income varies according to how the dollar values to the peso. OFWs who work abroad are presumed to send their income in the country to support their family. More often than not, OFWs receiv their income in the form of foreign currency (generally in US dollars), then remitted locally. Therefore, local take home pay varies according to how much is the value of the currency (dollar) at the time of the remittance. In theory, it is extremely favorable for them that the dollar has a higher value than the peso to enjoy a better life rather than a higher peso value.
In such case, recipient families enjoy bigger purchasing power, because income increases despite not exerting an effort. Currently, the value of the local peso has continuously devalued against the dollar, a local condition that is rarely seen the past decade. This phenomenon can be viewed positively by some local economic stakeholders like the exporters, OFWs, and international business but not the national government, because of the increased cost of doing business in the country. But if you are economically literate like my former student, you think of the bigger picture which is the resulting effect of a accelerated dollar and its grim effect to the nation.
On one hand, this can be viewed positively since an appreciation of the dollar could basically connote an increased business activity in the United States, which for a considerable number of years was deep in economic crisis. The situation can be viewed as more positively inclined than the other way around. The US economy dictates the tempo of world economy, therefore it may signal the start of a more robust economic activity. The US is practically any country’s biggest trading partner. Therefore a progressive US economy in more ways is beneficial to the rest of the world.
Locally, the start of the year saw a decline of the local indicators, which practically will most likely define what is at stake as far as the year 2014 is concerned. On the average, inflation rate hit a high 4 percent, a snag never before experienced in the two years. Therefore, all efforts exerted by authorities to control this nagging problem that will surely hit the ordinary “Juan Dela Cruz” this year has gone in vain. This came as an offshoot of what seem to be an unabated increase in the price of industrial commodities like oil, energy and other raw materials.
These seem to be the direction that the local economy will take at some point in this Year of the Horse. It will be characterized by fast-phased movements of several indicators that will outline our economic trail. Sadly, unemployment remains stagnant at more than 6 percent in the past year, and seems will remain as such for the coming year.
Higher inflation inevitably results to soaring interest rates, which predictably will put a halt to local investment because of the expensive cost of borrowing.
This will further be aggravated by the amount of budget that is needed by the government for the current fiscal year, which stands at P2.264 trillion. More often than not, government funds will not suffice the amount required for the budget because of liquidity problem. But the government in its effort to provide service to citizens has no other recourse but to resort to local and international borrowings. In such case, the government competes with the private sector in terms of borrowings, a case of “David and Goliath.” As a result, interest rates are raised.
However, the materiality of promises and pledges that were generated by the goodwill of the President’s state visits can save the day for the Philippine economy. This could negate all negative vibes created last year, and possibly could reverberate for this year and create positive outlook for 2014.
The disastrous event that transpired in Eastern Visayas, though great in regional magnitude, is a minor factor to the economic condition of the country for this year. In fact, the rehabilitation as well as infrastructure efforts to be undertaken by the government will create economic movements in that region of the country. With the enormous amount of money on hand to rehabilitate and bring back a semblance of normalcy (approximately P320 billion), is enough to provide jobs and business opportunities to around 12 million people directly and indirectly affected by the typhoon onslaught, at least in the next four years.
The current year is crucial to our economy as far as Pnoy’s leadership is concerned. The past two to three years of economic development still saw traces of former President Gloria Arroyo’s remnants of economic acumen. That is one legacy we cannot take away from the former president. Despite allegations of massive corruption in her regime, she left the country with a sound economic fundamentals and this has been enjoyed by PNoy’s rule until a year or two after Arroyo’s term.
But currently and at least in the middle of PNoy’s term; 2014 up to 2016, the end of his term, whatever will be the accomplishments of the Philippine economy will solely be to his own credit. The most that an ordinary “Juan Dela Cruz” can do is to be vigilant and supportive of whoever is in charge of our economic welfare. For after all, this is the only country we have and therefore should rear it . . .
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