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PIA Press Release

More gains from peso's appreciation seen

Manila (14 October) -- The Philippines is gaining more advantages than disadvantages from the peso's continuing appreciation against the United States (US) dollar.

Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Gunigundo made this assessment as he said a stronger Philippine currency augurs well for lower inflation, better debt service and more resources for government's infrastructure and social projects.

Although the peso's rise is lowering earnings of local exporters, he said such can be addressed through measures like enhancing products' competitiveness to increase sales volume.

"I think the peso's appreciation has more advantages as the export business isn't dependent on pricing alone," he said at the Kapihan sa Sulo forum.

He noted artificially depressing the peso's value to give local exporters price advantage won't address the problem since they must instead gear up for competition.

"The challenge is for our exporters to shape up," he said.

Gunigundo also noted the Philippine currency's appreciation isn't unique since other currencies are also appreciating unlike the US dollar.

He attributed the dollar's weakening to the US' fiscal deficit from higher expenses than earnings and its current accounts deficit from lesser American exports than imports.

Rising remittances from overseas Filipino workers, Philippine exports and foreign capital in the country are also contributing to the peso's appreciation against the dollar, he said.

National output, foreign portfolio investments like those in stocks and government securities as well as equity investments nationwide are also increasing while inflation is lowering, he continued.

"We can say the financial market's confidence is still there," he noted.

Gunigundo likewise described as realistic the PhP46 to PhP48 per dollar exchange rate used as basis for computing government's proposed 2008 national budget as he said the US economy at this time is weak.

He cited dive in US sub-prime market as among reasons for this weakness.

"Weakening will lower demand for Philippine exports so there'll be a corresponding slowdown in the peso's upsurge," he said.

He noted other emerging markets will experience a drop in respective exports to US. (PNA) [top]

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