Educate Filipinos on the strong US dollar

All-time high! A dollar is now 50 Php on the current currency exchange rate after a 10-year ‘dominance’ of Philippine Peso over US Dollar. But many Filipinos, especially the uneducated ones, rant and blame the strong dollar on Duterte’s foul mouth. Sad to say, even some self-proclaimed intellectuals fall for this nonsense.

Here is how you educate the Filipinos on why it happened.

The timing was great

After Philippine President Rodrigo Duterte slammed the US, a few days later, a report has emerged that the peso weakened, as quoted from an article in CNBC, “investors voted with their feet on the country's intemperate president.”

And according to a Bloomberg Columnist Christopher Lagner:

“If Duterte continues with his fiery rhetoric and controversial policies, bond investors can expect the (bond) premium to erode further, regardless of local dollar support.” [Star]

These statements were used by the anti-Duterte forces to discredit the fresh Duterte administration. Little that these uneducated folks know, the decline of Philippine Peso against US dollar was inevitable even on former President Noynoy Aquino’s end term. As Bloomberg calls it, “Philippine Peso Goes From Best to Worst Performer in Asia”, it happened on Aquino’s last few months in office!

But the anti-Duterte forces keep on insisting, “It couldn’t have gotten worse if Duterte did not win the Presidency.” Obviously, very stupid and lame excuse from the self-righteous intellectuals, who are believers of a tour guide no other than Carlos Celdran.

In February alone, a steady depreciation of the peso has been forecasted, so what happened now is not a shock to analysts.

So what’s the real deal here?

The strong US dollar affects the whole world, not just the Philippines, that is a fact. And a President like Duterte from a ‘little Philippines’ cannot be the only factor that could influence the Dollar-Peso exchange.

Read: Asia’s Accelerating Currency Rout Set to Sideline Central Banks, so should Duterte be blamed for this? All Asian currencies are experiencing it.

One article from Bloomberg even said, “A Trump Win Could Sink the Dollar”, but as it turned out, the dollar became stronger after his win, and US exporters complain. [BI]

In the Philippines, the noisy minority failed to see the GDP growth of the Philippines because of Duterte as he seeks investors, speeds up infrastructure spending and plans to open the economy to new players and foreign investors – particularly on power, energy, and telecommunications. [Aljazeera]

So let’s go straight to the fact here.

According to an article in IB Times, there are Three Factors Influencing The Weakening Of Philippine Peso:

1. US interest rate hike this December lure investors to sell funds to the US; therefore, weakening the value of the peso.
“With the expected Federal Reserve rate hike just around the corner, expect volatility to continue as players adjust for positioning and profit-taking,” The Philippine Daily Inquirer reported Metrobank Research, as saying. It also added that the P 50:$1 pair may be capped for the rest of the week as the Bangko Sentral ng Pilipinas is becoming more aggressive to reach to such pivotal level.

The US Federal Reserve is set to meet on Dec. 13-14 and analysts anticipate that it will implement the increase of interest rate. The expected hike has already sent jitters in the local stock market, with the local index hitting below the 7000 level.

2. Guian Angelo Dumalagan, market economist at the Land Bank of the Philippines said the peso remains weak due to the lack of fresh leads domestically and abroad.Dumalagan, however, said that there could be a shift in favor of the peso. “There might be a bias in favor of the peso, as likely softer US existing homes sales data could prompt investors to lock in the dollar's recent gains,” Rappler reported Dumalagan, as saying.

3. External volatilities in the global market will continue to influence the weakening of the local currency.The Trump administration points to the possibility of a weaker peso to above P50 level in 2017. This could be due to the aggressive government spending on infrastructure that Trump has promised to implement.

“However, if US spending plans are not as aggressive as expected, the dollar could depreciate, but might still remain above the P48 level due to safe-haven demand amid political uncertainties in the Philippines and the US,” Dumalagan said.

Still not convinced? Here I quote an article from ABS-CBN:

“The peso weakened to the key P50 per dollar level on Thursday as the greenback maintained its strength as investors around the world reconfigured their portfolio's ahead of US president-elect Donald Trump's assumption into office.”

Enough with proving how stupid the followers of Carlos Celdran and Solon are, let us not focus on the effects of a strong or weak Philippine peso.

Who benefits from a weaker Peso vs US Dollar?

With a strong US dollar over Philippine Peso, the beneficiaries of this turnover are:

1.) The BPO Industry – one of the biggest contributors of the GDP growth here in the country, the BPO industry, which employs milions of Filipinos are one of the people who will benefit from a weaker Peso. Since the BPO Industry gets its money from abroad (outside of the Philippines), they will earn more with the same cheap labor they give to the Filipinos.

2.) OFW remittances – send less, get more, the OFW remittances will surely benefit from this. Aside from exports, OFW remittances is one of thebiggest sources of foreign exchange inflows to the Philippines.

3.) Exports – A weak currency is supposed to make our goods more competitive to export. One should ask if the weak peso, which was extant for so many years, had resulted in the development of a meaningful export industry. [Inq]

And who benefits from a stronger Peso vs US Dollar?

While a strong Philippine peso will benefit the:

1.) Lesser national debt – our debt from the US and World Bank will go down in value since the peso is stronger than the US dollars.

2.) Strong imports – with cheap dollars, buying from outside the Philippines will be benificial to the imports industry players, high-quality products outside the country will be cheaper and will prompt the imports players to buy more and in turn sell in a greater value in the local market.

The conclusion?

A weak or a strong Philippine peso will have effects in our economy, a strong peso can even hurt the Philippines because millions of Filipinos are working in the BPO Industry and abroad. But despite their disadvantages, opportunities will come up every time, like how a weak peso can benefit the exports industry, making our products compete in the international market.

The only challenge to this administration is to balance every change. But with all the knowledge we gained from the stronger US dollars, we have debunked statements from the negative side that Duterte will bring the economy down and that he is the cause of a weaker peso. That’s how the economy works for folks, and Duterte has little thing to do with that.

If the yellows or the anti-Duterte forces still won’t believe the data and sources I gathered all over the internet, then you have the right to call them stupid. It’s a fact.