There had been a time when the Philippine Peso was pretty close in value to the US Dollar; being a former colony of the latter country was part of the reason. However in the years after complete independence the Peso began to devaluate, especially when it was made a floating currency, tied to the domestic debt and the people’s perception of both the government’s stability and ability to pay said debt. Over the decades the Peso lost about 99% of its original value in 1903-1949. At the very latest, the currency is now at its weakest value in over a decade.
The Manila Bulletin reports that on Wednesday, February 14, the Philippine Peso slipped even further in value to close that day’s trading at P52.12 to the US Dollar. In doing so, it broke the year-long Peso-Dollar valuation assumption by the Bangko Sentral ng Pilipinas (BSP), leaving the currency at its least valuable in 11 years and 7 months. Going back to that time, 2006, the Peso was at a P52.16 low. That degree of devaluation was called by analysts from Metrobank, based on data from the Philippine Dealing System. It has cemented the Peso’s reputation as Asia’s worst-performing currency.
Other analysts are in agreement over the root cause of the Peso’s stark devaluation: the current trend of excessive importing. Following a rise in the amount of infrastructure being developed to raise economic growth, government and business are resorting to more importation of materials for their infrastructure projects. The ANZ Banking Group’s Head of Asia Research Khoon Goh noted to Rappler that this trend has produced a significant trade deficit with imports far outweighing exportation. Analyst Riche Lim of BPI Securities concurs, expecting further decline in the Peso with the continued infrastructure spending, as he notes on ANC’s “Market Edge”.
Despite that, government officials are of the opinion that the P52+ Peso-Dollar value is no portent of economic doom. (BSP) Governor Nestor A. Espenilla Jr. assures the currency market that their economic fundamentals have not been compromised by the latest devaluation. Adding his input is Budget Secretary Ben Diokno, who says that a weak Peso does not automatically mean a weakening economy. He further elaborates that the government has seen this slide coming and has already made the necessary adjustments to their medium-term economic strategies. In a press conference, Diokno says that the best Peso status is competitive, not strong.
Towards the end of 2017, the Pesos had been playing around $49 to the Dollar, only to begin its latest decline in 2018, falling from P49.95 to P51 by January.
Photo courtesy of news.abs-cbn.com
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