Editorial
FOR most of us Filipinos at home whose incomes are in Philippine pesos, it could seem to be a great boon that our currency is now at its highest level against the US dollar in 56 months.
Yesterday, the peso rate ranged between P40.754 to P40.915 to the dollar. P41 to $1 was thought to be a record. The peso could even strengthen to P40 to $1.
The peso continues to strengthen because of: (1) the continuing bad health of the US and European economies, and improvements in the US economy, (2) the never-ending increase in OFW remittances to their families, (3) the continuing surge in Gross Domestic Product, which in the third quarter this year grew by 7.1 percent, more than twice the GDP figure of the third quarter of 2011, (4) the good news that the latest Forbes’ “Best Countries for Business” List has raised our ranking to 87th among 141 countries, ahead of China (96th) and India (97th), (5) the large foreign exchange reserves of the Bangko Sentral ($82 billion) and the P2.95 trillion in deposits (savings) held by the Philippine banking system, (6) the relatively low inflation rate, and (7) many other indicators showing, as the government and the Bangko Sentral love to boast, that ours are “very sound fundamentals.”
The continuing frailty of the US and European economies—which makes their stock and money markets weak—drives American and European players send their money to the Philippines (and China and India and our fellow Asean members) because their peso and Philippine stock holdings earn more here.
At the same time any sign that the US economy is regaining health also drives up the Philippines because the USA is the most steady and largest buyer of our products.
Everybody knows that the remittances of our OFWs to the families have, through the decades, been the most solid foundation of our country’s economic stability. That’s the reason the OFWs have been called our economic heroes and saviors. Whenever things have gone bad with the world economy, and Philippine banks and corporations were hit by global economic crises, they have survived, as did our central bank, because of the OFW remittances. These even increase, whenever there are global problems. Why? Because the OFWs are abroad working their butts off to keep their families fed and supplied with essential necessities and some luxuries.
The Gross Domestic Product (GDP) figure of a country is the cash value of all the “final goods and services” produced inside that country within a year. (The government, following internationally accepted principles, defines the “final goods and services” are.) Our GDP has been growing—not shrinking—as the GDP of some wealthy industrialized country are. And growth is limited to 1 to 2 percent in those rich countries that are still registering GDP growth.
Our GDP has been among the fast growing ones—3 to 5 percent. And, great news, the latest figure shows that our GDP in the 3rd quarter of 2012 is more than double—7.1 percent—than growth in the third quarter last year, which was only 3.5 percent but still impressed the World Bank and others institutions monitoring the global economy because other countries were not growing that much.
These factors feed each other and result in more economic indicators showing that our economy is all right.
The Philippine government, banks and private corporations whose debts are denominated in dollars will spend less pesos paying off these debts. That’s one of the greatest good effects of a strong peso.
Our imports of supplies, medicines, machinery, rice and other food imports cost us less in pesos.
Our massive poverty problem
All of the positive effects create the perception that we are truly on the way to prosperity and solving our massive poverty problem.
Poverty is a massive problem: Some 25 to 35 percent of our families live below the poverty line. And the 10 to 15 percent of our families who are just slightly better-off than these dirt-poor and hungry ones are also bereft of the essential things that make for a sound existence. So it is really about 50 percent of our families that are poor and needy.
Is the fact that the peso is very strong against the US dollar going to make our poor less poor?
Not really. It might make imported rice cheaper so the government can give more to the destitute or price cheap rice much cheaper so the poor can afford it. But the penalties can wipe out the advantages of a strong peso.
Disadvantages of a strong peso
Yes, there are disadvantages. And that’s why the Bangko Sentral is watching the rate and ready to intervene and take steps to weaken the peso—if necessary.
One of the most undesirable effects is the hardship the strong peso causes our OFWs, the economic heroes whose remittances support the stability of our economy and the huge foreign exchange reserve of our central bank.
The strong peso makes it more expensive for OFWs to support their families. Because the OFW families pay all their daily needs—food, rent, school fees, etc.—in pesos, OFWs have to send more dollars to buy the same amount of goods and services their families consume.
That is the reason OFWs’ remittances keep surging.
Exporters hurt too
A strong peso also makes Philippine products more expensive to our customers abroad. As a result, importers of our food and handicrafts, and even of the IT and other high-tech products assembled here, are now buying from other countries. This means the strong peso is killing some of our export industries.
Even our most profit-making industry, Business Process Outsourcing (BPO), has become more expensive to clients. So there’s a danger that they would get their needs filled by BPOs in other countries.
FOR most of us Filipinos at home whose incomes are in Philippine pesos, it could seem to be a great boon that our currency is now at its highest level against the US dollar in 56 months.
Yesterday, the peso rate ranged between P40.754 to P40.915 to the dollar. P41 to $1 was thought to be a record. The peso could even strengthen to P40 to $1.
The peso continues to strengthen because of: (1) the continuing bad health of the US and European economies, and improvements in the US economy, (2) the never-ending increase in OFW remittances to their families, (3) the continuing surge in Gross Domestic Product, which in the third quarter this year grew by 7.1 percent, more than twice the GDP figure of the third quarter of 2011, (4) the good news that the latest Forbes’ “Best Countries for Business” List has raised our ranking to 87th among 141 countries, ahead of China (96th) and India (97th), (5) the large foreign exchange reserves of the Bangko Sentral ($82 billion) and the P2.95 trillion in deposits (savings) held by the Philippine banking system, (6) the relatively low inflation rate, and (7) many other indicators showing, as the government and the Bangko Sentral love to boast, that ours are “very sound fundamentals.”
The continuing frailty of the US and European economies—which makes their stock and money markets weak—drives American and European players send their money to the Philippines (and China and India and our fellow Asean members) because their peso and Philippine stock holdings earn more here.
At the same time any sign that the US economy is regaining health also drives up the Philippines because the USA is the most steady and largest buyer of our products.
Everybody knows that the remittances of our OFWs to the families have, through the decades, been the most solid foundation of our country’s economic stability. That’s the reason the OFWs have been called our economic heroes and saviors. Whenever things have gone bad with the world economy, and Philippine banks and corporations were hit by global economic crises, they have survived, as did our central bank, because of the OFW remittances. These even increase, whenever there are global problems. Why? Because the OFWs are abroad working their butts off to keep their families fed and supplied with essential necessities and some luxuries.
The Gross Domestic Product (GDP) figure of a country is the cash value of all the “final goods and services” produced inside that country within a year. (The government, following internationally accepted principles, defines the “final goods and services” are.) Our GDP has been growing—not shrinking—as the GDP of some wealthy industrialized country are. And growth is limited to 1 to 2 percent in those rich countries that are still registering GDP growth.
Our GDP has been among the fast growing ones—3 to 5 percent. And, great news, the latest figure shows that our GDP in the 3rd quarter of 2012 is more than double—7.1 percent—than growth in the third quarter last year, which was only 3.5 percent but still impressed the World Bank and others institutions monitoring the global economy because other countries were not growing that much.
These factors feed each other and result in more economic indicators showing that our economy is all right.
The Philippine government, banks and private corporations whose debts are denominated in dollars will spend less pesos paying off these debts. That’s one of the greatest good effects of a strong peso.
Our imports of supplies, medicines, machinery, rice and other food imports cost us less in pesos.
Our massive poverty problem
All of the positive effects create the perception that we are truly on the way to prosperity and solving our massive poverty problem.
Poverty is a massive problem: Some 25 to 35 percent of our families live below the poverty line. And the 10 to 15 percent of our families who are just slightly better-off than these dirt-poor and hungry ones are also bereft of the essential things that make for a sound existence. So it is really about 50 percent of our families that are poor and needy.
Is the fact that the peso is very strong against the US dollar going to make our poor less poor?
Not really. It might make imported rice cheaper so the government can give more to the destitute or price cheap rice much cheaper so the poor can afford it. But the penalties can wipe out the advantages of a strong peso.
Disadvantages of a strong peso
Yes, there are disadvantages. And that’s why the Bangko Sentral is watching the rate and ready to intervene and take steps to weaken the peso—if necessary.
One of the most undesirable effects is the hardship the strong peso causes our OFWs, the economic heroes whose remittances support the stability of our economy and the huge foreign exchange reserve of our central bank.
The strong peso makes it more expensive for OFWs to support their families. Because the OFW families pay all their daily needs—food, rent, school fees, etc.—in pesos, OFWs have to send more dollars to buy the same amount of goods and services their families consume.
That is the reason OFWs’ remittances keep surging.
Exporters hurt too
A strong peso also makes Philippine products more expensive to our customers abroad. As a result, importers of our food and handicrafts, and even of the IT and other high-tech products assembled here, are now buying from other countries. This means the strong peso is killing some of our export industries.
Even our most profit-making industry, Business Process Outsourcing (BPO), has become more expensive to clients. So there’s a danger that they would get their needs filled by BPOs in other countries.
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