Peso depreciation will hit ordinary Filipinos: economist

·2 min read
Vendors work at a public market in Quezon City, Philippines, August 9, 2022. Economist and academic Emmanuel Leyco claimed that ordinary people will suffer the most in light of the peso depreciating. REUTERS/Eloisa Lopez
Vendors work at a public market in Quezon City, Philippines, August 9, 2022. Economist and academic Emmanuel Leyco claimed that ordinary people will suffer the most in light of the peso depreciating. REUTERS/Eloisa Lopez

Economist and Pamantasan ng Lungsod ng Maynila (PLM) president Emmanuel Leyco claimed that ordinary people will suffer the most in light of the peso depreciating, especially due to the Philippines’ importation of basic commodities.

“The ordinary people will definitely feel the pain of the depreciation peso,” he said on Tuesday (September 6). “We are almost importing everything, consumer goods – onions, garlic, fish. We import petroleum, and without price movements in the petroleum market [..] the price of petroleum in the pump will definitely go up.

On September 2, the Philippines hit its lowest low in terms of the exchange rate at P56.999 to $1. Leyco associated this with the series of interest rate hikes done by the United States Federal Reserve to combat inflation.

“The interest rates in the US continue to go up, or inflation remains to be uncontrolled and therefore the US continues to consider raising interest rates. And if that happens, the Philippine peso will continue to depreciate,” Leyco said.

The economist described the recent exchange rate between the two currencies as a “psychological level” brought upon by speculation in the currency market.

“P57 to $1 was a psychological level and it seems that it’s like if you hit P57, anything can go next. So probably it can be P57.06 tomorrow, P57.25, because we haven’t seen the end of the movement of the US dollar,” he said.

He added, “57 to a dollar is disturbing, however, when we continue to say we will depend the peso, it only invites more reaction from currency traders.”

The Bangko Sentral ng Pilipinas (BSP) on Tuesday commented on the trajectory of inflation for 2022, saying that “baseline projections continue to indicate above-target inflation.” The national government has a 2 to 4 percent inflation target, far from the recently announced August 2022 rate of 6.3 percent.

While BSP can hike the cost of borrowing, Leyco mentioned that the central bank’s dollar reserve “is already being watched,” and may only lead to more speculation.

“The Philippine central bank will release more dollars into the market, but then our dollar reserve is not unlimited. The more the Bangko Sentral intervenes, the more speculation there will be,” he said. “I think we have to be very, very careful about what Bangko Sentral can do in the currency market. We can go back to our experience in the 1990s when speculation about currency movements fueled more speculations rather than control it.”

He added, “It will be so easy to wipe it out if we continue to participate in the currency market actively.”

Mark Ernest Famatigan is a news writer who focuses on Philippine politics. He is an advocate for press freedom and regularly follows developments in the Philippine economy. The views expressed are his own.

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