Weak peso even benefits economy, says Espenilla

The weak peso helped local products to regain their price competitiveness in the world market, consistent with the government’s investment and export-led growth strategy, Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla Jr. said.

Speaking before the Economic Journalists Association of the Philippines (EJAP) economic forum, Espenilla said the peso is now trading at a range of 51 per $1, similar to its trading range in 2005.

When the peso depreciates, the cost of local goods abroad becomes cheaper in dollar equivalent.

Filipinos working overseas also benefits from a weak peso since their dollar earnings converts to a bigger amount in pesos.

However, the central bank chief said domestic scenario is different now because the country has been elevated to investment grade status by the major credit raters.

“Back then we were junk rate. Today, we are investment grade. And definitely we are not in a foreign exchange crisis,” he said.

Espenilla stressed that the central bank “is in firm control of the exchange rate.”

He said the peso has depreciated by about 2.5 percent since the start of the year but this rate is still okay and the peso is not in a free-fall.

Espenilla said “moderate weakening of the peso is actually supportive of exporters, of overseas workers, BPO, (and) tourism. So there are positive things there.”

Market players’ worries on what is happening globally is the reason for the peso’s movement, he said.

He said, however, that domestic macroeconomic fundamentals such as inflation, budget deficit, domestic growth, and foreign exchange reserves were all supportive of the local currency.

The peso registered gradual improvement this week following Espenilla’s several assurances that the peso remained resilient and competitive.

He attributed the positive development to calming of market players’ concerns.

“I like to think that they remember that we’re talking here of an economy that’s very different from crisis economy. This economy is not in crisis,” he said.

“We’ve always said that while the peso is market-determined the BSP is carefully monitoring developments and will take necessary actions when things go out of hand. We’re always watching the market,” he said.

Foreign exchange rate is market determined although