Peso Is Now Asia’s Worst Currency: A Look At The Peso Since Duterte Took Office
On February 14, the Philippine Peso breached the P52.16 mark versus $1 for the first time in almost 12 years. In the past days since Valentine’s Day, the peso continued to play around this value, today trading at P52.193 to $1. Many Filipinos are alarmed while many OFW families are happy about this decline in the value of peso. But what does this mean for the Philippine economy and has President Rodrigo Duterte’s administration and policies brought about this change in our currency?
The Peso’s value has been in jeopardy since last year, when it became Asia's worst-performing currency in August 2017. The Philippine currency has been dubbed as the worst performing in Asia in 2017, with the U.S. dollar rising around 3.7 percent against the peso while all other Asian currencies saw growth.
According to Angelo Taningco from Security Bank’s Treasury Group, the decline of the peso is largely because of the foreign equity outflows. In money terms, this means that foreign investors are moving their assets outside of the country because of perceived weakness in the country’s economy.
In addition to the continued exit of foreign assets and capital, the decrease in OFW remittances because of the Department of Labor and Employment (DOLE)’s total ban on deployment to Kuwait might have added salt to the wound. According to data from the Bangko Sentral ng Pilipinas (BSP), OFWs from Kuwait sent $735.24 million in remittances to the Philippines from January to November of 2017 alone—this amount would have at least drilled a micro hole in the economy, taking into account the country’s heavy reliance on OFW remittances.
While many OFW families are rejoicing on the low value of peso—since this means that overseas remittances would afford them more purchasing power here in the Philippines—the country in general might be suffering from the currency’s weak value.
Right off the bat are the price of imported products—which, nowadays, range to everything! Did you know that we even import rice and flour? A weaker peso means that the prices of these common household products will go up. Fuel is another key product that we’re importing and weaker peso means that fuel price is higher—which, in extension, increases the prices of transportation and other goods that needs to be transported like fruits, vegetables, fish, meat products, and so much more. Add to that the higher excise tax on fuel, and you’re left with sky-high prices for basic commodities.
But how did we get here? Many Duterte critics are saying that the current administration’s policies may have been affecting the strength of the currency. With Duterte getting into a quarrel with US in the last years and denying aid from the country, and with extrajudicial killings so bad that International group Human Rights Watch has raised an alarm, it’s not hard to make sense why many foreign companies are withdrawing their investments from the country.
When Duterte took an oath and started his term on June 30, 2016, the peso was at P47 to $1. For two months, confidence on the currency continued its strength that the peso went up at as high as P46 to $1 in August. But from August, the currency started its downward climb and from the period of August to December 30 2016, the currency fell from P46 to P49.50.
Slowly, but surely, the peso continued to fall throughout 2017. By August 14, the peso was steadily at P51 to $1, playing around P50 to P51 until December 21. December 22, the peso saw the P49.99 mark for the first time in months, only to fall back to P50 for two days before making a P49 run until January 7.
After the first week of January, the New Year positivity started to subside and the peso fell into its old rhythm. By January 29, the peso is back to P51 levels until breaking P52.06 on February 13.
The next huge question is: should we be worried?
According to Budget Secretary Benjamin Diokno, the Philippine peso’s low value does not necessarily mean that the economy is weakening. “Every currency is weakening vis-à-vis the dollar. In fact, relative to other countries, we are okay. It is wrong to say that a strong peso means a strong economy. That's false. We need a competitive peso, not strong peso.”
Analysts quoted by ABS-CBN last week said that the peso could slide to as low as P53 before the year ends due to the continued huge money outflow, BSP’s steady interest rates, and the bank’s "dovish" inflation estimates.