The Market Monitor Minding the Nation's Business
By Lito U. Gagni
The Bangko Sentral ng Pilipinas (BSP) policy of strengthening the peso is among the factors that have denied the country of inclusive growth, the Foundation for Economic Freedom (FEF) said.
FEF President Calixto Chikiamco said the need for a “competitive exchange rate” is one of the five desired objectives that the country needs to have inclusive growth, or growth whose economic benefits filter down to include the masses.
Chikiamco was one of the featured speakers of the forum sponsored by “Bagong Sistema,” a policy advocacy being spearheaded by former Chief Justice Reynato Puno, to better the country’s economic prospects.
“Economic growth has been robust for the past five years and, yet, growth has not been inclusive,” Chikiamco said, as he detailed what he described as a flawed objective of the BSP on inflation targeting.
He noted that, while the inflation rate stood at just 1.2 percent, which is the lowest the country ever had, the poverty incidence has gone up to 25.8 percent.
The failure of the country’s growth rate, which averaged 6.3 percent, to benefit the country’s poor has been the focus of attention of even multilateral agencies like the World Bank, since the government has failed to address the growing income inequities.
It is the need to address the structural problems in the government that has led to Puno’s advocacy to change the country’s political system.
To back this up, Puno and his group, which includes former Budget Secretary Salvador Enriquez, former UP President Jose Abueva and former Senate President Aquilino Pimentel Jr., has been going the rounds to propagate their advocacy.
There is a need for a “coordinated government policy to make the peso competitive,” Chikiamco said, citing findings that BSP purchases of dollars are “not inflationary due to liberalized trade regime.”
“BSP is fighting the last war,” with the world facing a structural deflation, said findings that the FEF president presented before the forum at the Club Filipino last week.
Chikiamco also cited several benefits of a “weak” peso: it makes exports and business-process outsourcing (BPO) services competitive, protects local industries from imports and smuggling of cheap goods; and increases the purchasing power of the overseas Filipino workers (OFWs).
Also, a weak peso would create a bias for labor versus capital and encourage high domestic value-added industries, like agriculture.