Lower oil prices to ben­e­fit peso dur­ing 1st sem

Sun.Star Cagayan de Oro - - Business -

The drop in in­ter­na­tional petroleum prices is seen to give the Philip­pine peso some lift dur­ing the year’s first se­mes­ter but Fitch So­lu­tions ex­pects the lo­cal unit to be in dep­re­ca­tion mode be­yond that, ending 2019 at about 54.13 against the green­back.

To date, the lo­cal cur­rency is trad­ing at the 52-level against the US dol­lar.

In a study dated Jan­uary 9, the re­search firm said the lo­cal unit is gen­er­ally seen to be weak this year due to deficits in the coun­try’s cur­rent ac­count (CA) and trade bal­ance, po­lit­i­cal un­cer­tain­ties, and neg­a­tive real in­ter­est rate dif­fer­en­tial with the US.

“How­ever, we ex­pect the weak­ness to be rel­a­tively mod­est as com­pared with 2018, helped by the de­cline in oil prices and grow­ing head­winds to broad dol­lar strength,” it said.

The coun­try has been post­ing CA deficits as it im­ports more to meet the grow­ing do­mes­tic de­mand, due mainly to in­creased in­fra­struc­ture in­vest­ments.

Pre­lim­i­nary data from the Philip­pine Sta­tis­tics Au­thor­ity (PSA) showed that in Oc­to­ber 2018 alone, ex­ports grew by 3.3 per­cent year-on-year while im­ports rose by 21.4 per­cent.

Trade bal­ance in the 10th month last year stood at a deficit of USD4.21 bil­lion, higher than the USD2.59 bil­lion in the same month in 2017.

The re­port said real in­ter­est rate dif­fer­en­tials against the US are still at neg­a­tive ter­ri­tory.

In 2018, the Bangko Sen­tral ng Pilip­inas’ (BSP) pol­icy-mak­ing Mon­e­tary Board (MB) hiked the cen­tral bank’s key rates by a to­tal of 175 ba­sis points as in­fla­tion climbed be­yond the govern­ment’s 2 per­cent to 4 per­cent tar­get band for 2018-2019.

To date, the BSP’s overnight lend­ing rate is 5.25 per­cent.

On the other hand, the Fed­eral Re­serve’s key rates are cur­rently be­tween 2.25 per­cent and 2.5 per­cent.

The rate of do­mes­tic price in­creases peaked at 6.7 per­cent last Septem­ber and Oc­to­ber but have de­clined to 6 per­cent and 5.1 per­cent, re­spec­tively, in the fol­low­ing two months af­ter sup­ply is­sues on rice and other food items have been ad­dressed.

The price of rice posted big upticks last year due to lack of sup­ply and this pushed in­fla­tion rate up in most of last year.

The sup­ply con­straints have been ad­dressed af­ter Mala­cañang tasked the re­lease of rice stocks from all Na­tional Food Au­thor­ity (NFA) ware­houses na­tion­wide and in­crease im­por­ta­tion, among oth­ers.

De­cline of global oil prices also helped the do­mes­tic rate of price in­creases de­cel­er­ate.

Amid the slow­down of in­fla­tion in the last two months of last year, Fitch So­lu­tions still fore­casts a 50 ba­sis points in­crease in the BSP’s key rates this year.

Rel­a­tively, it cited po­lit­i­cal un­cer­tain­ties as an­other fac­tor that is dis­ad­van­ta­geous to the peso, cit­ing Pres­i­dent Ro­drigo Duterte’s pref­er­ence to­wards China and Chi­nese in­vestors com­pared to Western na­tions.

“This could have neg­a­tive im­pli­ca­tions for his al­lies at the up­com­ing May 2019 mid-term elec­tions, and re­sult in fur­ther po­lit­i­cal un­cer­tainty,” it said.

The re­port, on the other hand, pointed out that risks to its pro­jec­tion for the peso “are tilted to the down­side.”

“On the one hand, a re­ces­sion or sharp eco­nomic slow­down in the US could see the US Fed halt or even re­verse its rate hik­ing cy­cle, which could be broadly neg­a­tive for dol­lar strength,” it said.

“On the other hand, more on the down­side, the Philippines has been in­creas­ing eco­nomic link­ages and ex­po­sure to China (and mov­ing away from the west), at a time when the Chi­nese econ­omy is ex­pe­ri­enc­ing a slow­down and em­broiled in a trade dis­pute with the US. This could re­sult in more down­side volatil­ity in the PHP should ex­ter­nal fi­nanc­ing from China dry up,” it added. (PNA)

FI­NANC­ING FOR MARANAO TRADERS. The Small Busi­ness Cor­po­ra­tion on Jan­uary 9, 2018 par­tic­i­pated dur­ing the Mus­lim Traders’ En­trepreneur­ship Fo­rum 2019 at the FilOil Fly­ing V Arena in San Juan City in sup­port to the Depart­ment of Trade and In­dus­try’s (DTI) ad­vo­cacy of help­ing Maranao traders through­out the coun­try. Speak­ing be­fore Maranao en­trepreneurs, SB Corp. Fi­nanc­ing Sec­tor Group Head Lour­des Rosario Baula dis­cussed the Pondo sa Pag­babago at Pag-asenso (P3) Pro­gram, the ad­min­is­tra­tion’s land­mark loan fi­nanc­ing pro­gram in­tended to give mi­cro en­ter­prises bet­ter ac­cess to fi­nance, pro­vid­ing them an al­ter­na­tive to the in­for­mal or 5-6 scheme of lend­ing. Un­der the P3 Pro­gram, a mi­cro en­ter­prise can bor­row be­tween P5,000 up to P200,000 de­pend­ing on its busi­ness need and re­pay­ment ca­pac­ity with no col­lat­eral re­quire­ment. In­ter­est rate and ser­vice fees, all in, do not ex­ceed 2.5% monthly. The Mus­lim Traders’ En­trepreneur­ship Fo­rum 2019 was ini­ti­ated by DTI in part­ner­ship with the lo­cal govern­ment of San Juan, Small Busi­ness Cor­po­ra­tion, Tech­ni­cal Ed­u­ca­tion and Skills Devel­op­ment Au­thor­ity (TESDA) Philip­pine Trade Train­ing Cen­ter (PTTC), non-govern­ment or­ga­ni­za­tion ASA Philippines, Philip­pine Cham­ber of Com­merce and In­dus­try (PCCI), Go Negosyo, and Coca-Cola Philippines.PR

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