How would BBM address the weakening of the peso?

While working and vacationing here in the Cayman Islands, where our Arab client has multiple high-value properties, my fellow Filipino team members and I are contemplating on the widely-publicized weakening of the Philippine peso. Of course, to be fair, this is not the fault of BBM, but an overall impact of multi-faceted macro and micro financial and economic factors. The former president has a lot of explaining to do, though. How should this government avoid letting our country become another Sri Lanka?

Our peso is now emerging as the worst performing currency among the ASEAN economies, including Singapore, Malaysia, Indonesia, Thailand, Vietnam, Myanmar, Laos, and Brunei. Imagine, the Laotian currency is performing better than the Philippine peso. Our economic and financial managers including the government experts on finance and the economy, are projecting that the Philippine peso is facing more and stronger headwinds for the rest of the year.

On July 1, the Philippine peso was reported to have breached ₱55 pesos to $1 exchange rate when it plunged to ₱55.09. That is the peso's weakest performance in the last 17 years. It can be recalled that it hit ₱55.08 to $1 on October 27, 2005.

From macro and global perspectives, this trend is driven by multiple external factors, including the relentless tightening by the USA Federal Reserve to address rising inflation. The Russia-Ukraine crisis also drove inflation higher with the skyrocketing of the oil and food prices, with domino effects on related commodities.

From the domestic scene, the weakening of the peso is pushed by the rising inflation, which peaked at 5.4% in May. Perhaps too much election spending drove the inflation higher, and that was the highest since 2018.

This is alarming, given the prospects of a worldwide food shortage that shall surely bring untold miseries and sufferings to our already-battered millions, the poor and poorest of the poor.

To solve this emerging financial crisis of unprecedented proportions, it is imperative that BBM's economic team should move fast and be smart enough to arrest the momentum of inflation that shall exacerbate the weakening of the Philippine peso. We should remember that in 2020, the Bangko Sentral ng Pilipinas slashed interest rates by 200 bps as a major component of the government's coping mechanism with the COVID-19 pandemic-driven economic downturn. On May 19 this year, the BSP delivered a 25 bps rate increase to address the emergence of the second round impact of the wage increases and the transport fare increases. It is expected that BSP will again deliver another 100 bps increase to bring back the benchmark interests rates to 3.5%.

All the government moves constitute a balancing act and require a very experienced and competent management team whose ears are on the ground and whose eyes are focused on global events and trends. The Marcos government's economic team needs to come up with short term measures to confront the immediate needs of the people and the economic players, as well as long-range measures to build a solid foundation for the Philippine economy.

Let us remember that more natural disasters are coming and the COVID-19 crisis is still unresolved. If our economic and financial leaders are not prepared, the sufferings of the people are bound to be exacerbated and made longer and deeper.

A leader of a struggling economy should have the wisdom of an owl, the speed and courage of an eagle, and the purity of a dove. I hope BBM can measure up to the huge challenge in front of him and the whole nation.

If he succeeds, the nation shall survive. If he fails, we shall end up being another Sri Lanka or Ukraine. China may attack us once it sees that we are weak and defenseless.

Much is expected of the leader but more is demanded from us, the people. Here in Curacao, I pray hard for our country and for our president. He might not have been our choice, but he is in charge now. And we are on the same boat. We sink or swim together.