After bouts of record lows hitting the P51 territory in its value against the US dollar in previous weeks, the local currency is seen stabilizing in the weeks ahead, Bangko Sentral ng Pilipinas (BSP) chief Nestor A. Espenilla Jr. said.
“We think the peso has now sufficiently adjusted and can be expected to regain relative stability going forward,” the governor told reporters in a statement on Monday.
The statement came after the local currency was cast in “unfavorable light” against seemingly stronger regional currencies.
“Some commentators of late would have us judge negatively the state of the Philippine economy merely on the basis of the depreciating trend of the peso against the US dollar,” Espenilla said.
“That’s a rather simplistic way to look at it. Rather, the better way to gauge the economy is to evaluate its progress toward delivering on things that ultimately matter to the people—low inflation, growth and jobs,” he added.
Last week the government announced the country’s GDP growth that accelerated to 6.5 percent in the second quarter, up from 6.4 percent in the previous quarter.
Espenilla said letting the peso weaken “to a more appropriate level” is part of the government’s way of steering the local economy to growth.
“Each economy faces its own unique challenges and should, therefore, be deliberately implementing policies that suit its circumstances and needs.
The Philippines is doing the correct thing in prioritizing a more investment-led economic growth,” Espenilla said.
“Allowing the peso to depreciate gradually to a more appropriate level is fully consistent with that strategy,” he added.
The BSP chief said such adjustment may create market uncertainty if not well explained. He also said speculators may want to take advantage by exaggerating for financial gain an otherwise “healthy price correction” to recover some of their price competitiveness.
“The BSP will not tolerate such speculative behavior and stands ready to use its very ample international reserves and deploy its full policy and regulatory arsenal if necessary,” Espenilla said.
“Pursuing a flexible and adaptive exchange-rate policy enables the BSP to keep its interest-rate policy settings squarely focused on achieving the inflation target while dampening consumption and supporting a more investment- and export-led growth that the economy needs to sustain its strong momentum over the long haul,” he added.
Image credits: Nonie Reyes