Finally, the export sector is starting to feel that the Bangko Sentral ng Pilipinas (BSP) has become “tolerant” of a weaker peso for the benefit of exporters and overseas Filipino workers (OFWs).
“I think that now, the outlook has changed. Whereas, before they [BSP] have been staunch in guarding the strength of the peso, now they’re being more attuned to keep the value of the peso, so that our competitiveness [as a sector] and our OFWs will benefit from it,” Philippine Exporters Confederation Inc. (Philexport) President Sergio R. Ortiz-Luis Jr. said in a phone interview.
This change in tack was also noticed by the Hongkong and Shanghai Banking Corp. (HSBC), which recently released a research note on the BSP’s perceived bias for a weaker peso as a move in aid of the OFW remittances and exporters.
“It [the BSP] may opt to be more tolerant of a weaker peso, helping exporters and OFWs gain some valuation effects,” HSBC was quoted as saying.
The peso gradually strengthened against the greenback in recent months, a development that the export sector, which is still reeling from the port congestion, feared would further drive down their competitiveness.
A stronger peso is a bane for dollar-earning groups such as exporters and OFWs, as their dollars are only able to buy less in peso value. For exporters, a stronger peso will make their products more expensive in foreign markets.
“We welcome this change in outlook. We have to be realistic, as other currencies, even the Chinese [yuan], have been weakening. Our peso should at least be at the level where it can compete with the others,” Ortiz-Luis added, hinting that the peso, even with the recent depreciation, is still overvalued.
The peso has diminished in value in the first two weeks of May, compared to the last two weeks of April.
Exports suffered a contraction of 0.2 percent in the first three months of the year to $14.24 billion, from $14.27 billion in the same period last year.
OFW remittances, on the other hand, experienced muted growth in the first two months of the year, growing by only 0.5 percent in January and 2.4 percent in February. The first-quarter remittance growth was at 5.1 percent, saved by the 11-percent hike in March, according to a recent release of the BSP.
Meanwhile, the Philexport is embarking on a nationwide information campaign for the Philippine Export Development Plan (PEDP) 2014-2016.
The PEDP, the export component of the Philippine Development Plan, has been awaiting President Aquino’s signature since late 2014. In the meantime, Ortiz-Luis said the industry is informing stakeholders in the provinces of the strategies and targets in the PEDP.
“We’re going through the provinces and the different regions just to inform them of our thrust and our targets,” Ortiz-Luis said.
The PEDP 2014-2016 sets a $100-billion export revenue target by 2016, lower than the initial $120-billion target set by the Cabinet economic cluster at the start of the Aquino administration.
Meanwhile, in a text message to reporters, BSP Governor Amando M. Tetangco Jr. said the first-quarter local output, measured as the gross domestic product, remains strong due to a number of factors, making possible sustained economic expansion in the Philippines.
“The BSP is of the view that prospects for the domestic economy remain favorable. Private demand will continue to be strong, aided mainly by sustained remittance inflows and low inflation,” Tetangco said. “Planned infrastructure spending and additional government expenses for the upcoming 2016 election should also provide an additional boost to the local economy.”
(With Bianca Cuaresma)