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Saturday, December 29, 2012

Philippine peso ends 2012 at ₱41.05 vs. US Dollars, up 6.5%

5 comments

STRONG PESO. The chart pertains to the average peso-dollar exchange rates for every month of 2012. The chart was based on data obtained from the Bangko Sentral ng Pilipinas and PDEX

The Philippine peso, the best-performing Southeast Asian currency in 2012, settled at P41.05 against the dollar on the last day of trading in 2012.

This made the currency 6.53% stronger than the 43.919 it started trading at on January 2. This also brought the average exchange rate to around 42.228 for the entire year and posted the biggest annual gain since a 19% appreciation in 2007.

The strongest close of the peso for the year was on December 8 at 40.862 while the weakest was on January 2 and January 17 at 43.919.

While little changed from a week ago, the local currency had a boost from the Philippines' phenomenal growth of 7.1% in the 3rd quarter -- the fastest in Southeast Asia -- as well as expectations that the Philippines is on track to winning its first investment-grade rating.

However, the stronger peso has been a bane to the following sectors:

Overseas Filipino workers (OFW)

With the strong peso, the purchasing power of the funds that OFW send to their loved ones in the Philippines are diminished. This is because the dollars they send home is equivalent to less in terms of pesos.

In January 2 this year, if an OFW sent $100 to his or her family in the Philippines, this is equivalent to 4,391.90. Using the exchange rate for the last trading day of the year, the $100 will only be worth P4,105.

This means less pesos to spend for various needs such as education, basic needs like food and utilities, and other expenses. There is also less room for savings and investments.

Total dollar value of remittances, however, has been resilient, data from the Bangko Sentral ng Pilipinas showed. OFW remittances fuel consumer spending, which is a backbone of the Philippine economy.

Business Process Outsourcing (BPO) firms

An appreciating strong peso strikes at the heart of the industry's -- and the Philippines' -- cost competitiveness as an investment destination. Business Processing Association of the Philippines (BPAP) president and CEO Benedict Hernandez said the appreciation of the peso has made handicapped them as they combat challenges from top rival India.

Hernandez had said they would have still remained competitive if the exchange rate stayed at 42:$1, but not beyond that since it widens the cost difference between putting up a BPO firm in the Philippines and India.

"The combination of an appreciating peso and a depreciating Indian rupee has provided India with a meaningful cost advantage," the BPAP had said. The Philippines has already dislodged India as the call center capital of the world.

At stake are about 638,00 direct jobs from the voice-based (call centers) and non-voice-based BPOs. Before the exchange rate issue, the industry players were hoping to double this to 1.3 million direct jobs and hit revenues worth $25 billion by 2016.

Exporters

Manufacturers and retailers of products sold abroad are face with Philippine-made products becoming more expensive when the peso appreciates. They either increase the prices of their goods abroad at risk of reducing demand for these items and products, or maintain their dollar prices and suffer losses as their peso-based production costs soar.

While exports are one of the country's highest dollar earners, along with remittances, they are also a key generator of jobs that are put at risk when the business costs become unsustainable. Export groups said this has caused half of the country's small exporters to close shop.

University of Asia and the Pacific (UA&P) economist Victor Abola said the government should allow the peso to depreciate by around 20 centavos every month. "I believe that the peso is 20 to 30% overvalued. The peso should be around P50 to the dollar to make the country competitive as India, whose exchange rate is at 55 to a $1," Abola explained.

Local firms

A strong peso also encourages cheaper imports, which in turn would threaten local producers, according to Socioeconomic Planning Secretary Arsenio Balisacan.

"We have to be worried by the appreciation of the peso because it affects the lives of ordinary people. It affects employment," Balisacan said, stressing that a strong peso will threaten to erode the country's overall competitiveness.

On the other hand, Balisacan noted that a strong peso also encourages the flow of hot money or investments in stocks and bonds, which help develop the local capital markets. (Read more on Rappler http://is.gd/F07hb8)

Rappler 

5 Responses so far

  1. Anonymous says:

    mga OFW, Attack!! time to send your money now to the Philippines. Baka by January 1 babagsak na naman yan at aabot ng P 39.00 at least piso kada dolyar ay malakin na rin yan. isang libo or dalawang libo sa $2000 USD nakakabili na yan ng isang sakong bigas

  2. Anonymous says:

    STRONG PESO FIGURE HAS NEGATIVE IMPACT ON SUCH AREAS BUT IF OUR PESO IS WEAK MORE NEGATIVE IMPACT WILL CAUSE TO OUR ECONOMY,
    LETS ENJOY STRONG PESO IT ONLY MEANS STRONG ECONOMY AND MORE INVESTMENT IS YET TO COME,,

  3. Anonymous says:

    negative impact dahil ang ekonomiya natin ay naka rely or naka depende PA RIN sa ibang bansa.

  4. Anonymous says:

    Wala namang bansa sa mundo ang nag depende lamang sa internal consumption. Hindi rin naman kasi pwede sa Pilipinas ang tayo tayo lang for the following reasons:

    1. OFW. Walang trabaho sa Pilipinas kaya mapipilitan ang mga pinoy mag trabaho sa ibang bansa- ito ay isa sa pinaka malaking impact sa economy

    2. Oil and Gas. napaka liit ng production ng oil and gas sa Pilipinas kaya keilangang mag import mula sa ibang bansa

    3. Electronics products. Walang pagawaan ng mga electronics product ang pilipinas. ang Pilipinas ay nag susuply lamang ng mga Chips na gagamitin sa pag buo ng isang producto subalit wala ang assembly line dito.

    4. Raw materials in cement and steel production. - Wala pa rin sa pilipinas ang lahat na raw materials sa pag gawa ng cement and steel aksi may mga mina tayo na pwdeing maging raw materials hindi pa rin na buksan hanggang ngayon kaya napipilitan tayong mag import mula indonesia, china, etc...

    at marami pang dahilan.......


    Kung matutugunan ng gobyerno natin ang mga dahila na nabanggit, maari tayong mag rely sa sarili natin ng pa unti -unti hanggang sa.. hindi na natin kailanangan ng ibang bansa para lumago

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