Skip to main content

Peso gaining way too fast

A newspaper headline (today) reports that the Philippine currency is gaining way too fast. What does this mean?

In economics, we were taught that a currency devaluation is not neccessarily bad. Devaluation encourages exports and discourages importations. For the Philippines, the peso has been on a constant decline for a long time and since a lot of consumer items are import dependent, consumers have been complaining about the reduction of their purchasing power.

Since 2006, the currency started to appreciate and now, exporters are being largely hit. Their costs are in peso and the export prices are dollar denominated. The appreciation of the peso have suddenly made them uncompetitive. In order to compete, they are forced to sacrifice by reducing their prices but their problem continues. Every decrease in their selling prices are being overtaken be a fast appreciating peso.

Its a a tough scenario for this businessmen. However, my stand is for the government to let the peso find its true value and not intervene. The Philippines must find its true level of competitiveness and compete in areas where it is superior.

Besides, the consumers stand to benefit from all these.

Comments

Popular posts from this blog

Land Reform: Land of Bondage Land of the Free

One of the most moving speeches that I've read. During grade school, this was the most often recited elocution piece in my school. Here it is, the text of Raul Manglapus' Land of Bondage, Land of the Free. Land of Bondage, Land of the Free By Raul Manglapus And yet, ladies and gentlemen, the tao is constitutionally free! No wonder, then, that the tao being a slave has acquired the habits of a slave. No wonder that after three centuries in chains, without freedom, without hope, he should lose the erect and fearless posture of a freeman, and become the bent, misshapen, indolent, vicious, pitiful thing that he is! Who dares accuse him now? Who dares rise up in judgement against this man, reduced to this subhuman level by three centuries of oppession? Ladies and gentlemen the tao does not come here tonight to be judged -- but to judge! Hear then his accusation and his sentence: I indict the Spanish encomendero for inventing taxes impossible to pay! I indict the usurer for s...

US PRESIDENTIAL CONVOYS

A columnist for a Philippine newspaper talks about the costs and massive preparations required by the US Secret Service whenever President Bush and other (US Presidents) travel outside of Washington DC. I remember watching a CNN report that showed how big a US presidential convoy is, compared to the two vehicle transport being used by Prime Minister Tony Blair of the UK.

How's the Philippine Economy?

The papers report the following: Mutual Funds are UP: First Metro leads the pack with a yield of 18% (year-to-date)with the others, not too far behind. It simply means that an investment made at the start of the year would have already earned 18% of its original value, by now. The Philippine currency is UP: The peso is close to breaking below PhP 48 to a dollar. The Stock Market index is close to attaining an all time (Pre Asian Crisis level). What does it actually say? The continued success of the country's Mutual Funds will most probably lure more foreign (short term investments) into the country. With the american mutual funds market hitting an average of only 10% for the entire 2006, more hot money can be expected to come in. If this momentum continues, coupled with a sustained increase in OFW (overseas foreign workers) remittances, and the absence of a sharply negative occurence in all the other sectors of the economy, the US dollar will most likely continue to decline. D...