Weaker peso vs dollar favorable for economy

A SLIGHTLY WEAKER peso against the dollar would be more favorable for the Philippines, Finance Secretary Carlos G. Dominguez III said, amid expectations that strong economic growth will allow the currency to remain at about the same level until next year.

“In the government, we are always trying to balance the benefit of the peso benefiting the OFWs (overseas Filipino workers) who are about 10 to 12 million against the people who import. So for me, I would prefer a peso that is slightly weak,” Mr. Dominguez said during a forum at Club Filipino in San Juan. “In other words, maybe P46- 47 that is what we would prefer because our OFWs benefit and also the exporters benefit.”

“In the past administration, they have always wanted a strong peso so you use less pesos to buy dollars. However, when you have too strong the peso two things will happen: your exports cost more so exporters here earn less, and your OFWs who are earning dollars will get less pesos.”

Remittances stimulate local consumption, which in turn contributed to nearly a tenth of gross domestic product last year.

The Finance chief said a peso hovering at the P46- P47 level would be optimal for now, a level which can likely be sustained despite some market headwinds.

“I think our economy is very stable and I think we will be relatively stable not only over the next week, but over the next year,” Mr. Dominguez said.

“We will slightly decrease because the dollar interest rate might go up, but I don’t think it will be very serious that our peso will go to P50. I think it will stay around where we are at the moment.”

He was referring to a looming hike in interest rates in the US which could bring the greenback stronger against emerging market currencies like the peso.

Mr. Dominguez said economic growth will likely settle “close to 7%” for 2016 buoyed by sound fundamentals, a balance of payments surplus, and a recovery in the local manufacturing sector.

Economic managers of President Rodrigo R. Duterte expect the peso to range at P45-48 against the dollar as of the Development Budget Coordination Committee meeting last July 5.

Meanwhile, the Finance chief also appealed to senior citizens to make a “little sacrifice” as the government eyes to lift exemptions on value- added tax in order to recoup some revenues that could offset losses from the planned reduction in income tax rates amounting to about P174 billion.

In turn, Mr. Dominguez said the current proposal will drastically bring down personal income taxes to just P500 for those earning P250,000 yearly for some 3.5 million Filipinos, and equip more individuals with higher disposable incomes.