UMBAY, HANNAH JANE C.

BSA – 3 MF 6:00-8:00PM

Peso among Asia’s strongest currencies

Implications for the ordinary Filipinos amid post-pandemic economy

A significant number of ordinary Filipinos patronized imported products and services i.e.
clothes, electronic products/gadgets, vehicles and many more. Frequently, goods from foreign
countries are preferred by resident citizens because of their pursuit in quality, brand, and value.
Despite of the import’s expensive nature, people are willing to pay in exchange for satisfaction
and in getting a justifiable value for the money they spent on certain products. To put things
simply, some Filipinos choose to buy imported products over domestic products regardless of the
price. Today, the real question is how these ordinary Filipinos take advantage of the peso
appreciation against the dollar? Is it really beneficial on our end or it’s just an immaterial change
for ordinary citizens?
Since the start of the year, the Philippine peso ranked first among the four currencies in Asia that
maintained their value against the US dollar. As of June this year, the peso has appreciated
against USD. According to Finance Secretary Carlos Dominguez, the reasons for the strong
performance of peso this year are – (1) the favorable Balance of Payment or BOP position of our
country, (2) increased foreign reserves and (3) low inflation rate. First, there is a drop in the
country’s imports due to the strict lockdown imposed by the government. This condition can
either be an implication of a current account surplus in relation to trade or a lower trade deficit.
Philippines reported a surplus in BOP since the beginning of April primarily due to the negated
impact of the muted global economic activity as a result of the pandemic. Moreover, Central
bank affirms that Philippines' overall BOP continued to post a surplus for long several months at
billions of U.S. dollars. On one hand, Bangko Sentral ng Pilipinas admitted that the BOP surplus
is a reflection of the inflows from the national government's foreign loan proceeds. In other
words, this surplus is mainly an effect of foreign borrowings and a lower trade deficit. This
international transaction of our country having to engage into heavy borrowing is a depiction of a
pandemic response. Nevertheless, Philippines’ foreign reserves increased at a parallel rate due to
the net inflow from this foreign loans and is now roughly larger than the total foreign debt as
claimed by Dominguez. This borrowing produced a multiplier effect simply by benefitting other
areas or components of our international accounts. Lastly, our country’s mild inflation rate
makes the PH currency value appreciate in the foreign exchange market. Generally, this currency
appreciation against the USD is actually a desirable condition, taking into account the recession
of the global economy since the COVID-19 outbreak. It is definitely a good thing for emerging
countries like Philippines because this gives more room to ease our monetary policy.
Some effects of currency appreciation are cheaper imports and a relatively more expensive
exports hence decreasing aggregate demand. Further, this “peso-value-appreciation” can be
beneficial to our country because it may persuade the Central Bank to willingly cut rates to
support growth and stimulate economy. In the future, if it is probable for Philippines to maintain
this peso strength, only then we can conclude that this current currency appreciation is a real
trajectory from our country’s healthier financial state and economic condition. Basing on this
line of reasoning, it is still debatable to conclude that this has an all-encompassing positive effect
to all areas of the Philippine economy. As declared by BSP, foreign borrowings are heavy this
year and this implies a surplus capital account which actually represents a surplus of foreign
liabilities. Is it good for the overall shape of our economy or is it the opposite. While it is true
that currency appreciation has significant advantages to a country, it is also undeniable that it has
its own drawback. One of its benefits to ordinary Filipinos is the improvement of the living
standards. It enables domestic consumers to buy cheaper imports of goods or services and in
return, fuel their demand for imported products as they uphold their continuing pursuit for
quality and value. In this regard, overseas asset become cheaper to acquire and this will
encourage investors to buy foreign assets which generate interest, profits and dividends.
Notwithstanding the positive impact, this peso appreciation also bring a certain amount of
downside in some areas of our economy. When a currency is strong and appreciate against one
or a basket of currency, exports become more expensive. This will lead to an adverse effect in
international trade since foreign countries will be unwilling and uninterested to purchase
expensive goods. Trade partners will perceive foreign exports as being relatively expensive and
would be inclined to buy from a cheaper source. This drawback has greater impact on domestic
industries who rely on exports or on a large number of overseas visitor e.g. tourism and transport
sectors. This will lower their profits and in the long run, be reflected in the country’s universal
economic performance. In essence, the peso value appreciation has satisfy a specific economic
sector and on one hand, frustrate other sectors. This may be a harsh theory but it is something
that needs to be accepted and examined since this is normally the underlying effect of this
economic phenomena. Nevertheless, the relevance of this condition is inclined to the benefits it
could bring to the citizens. These advantages refer to better standard of living, stimulated foreign
investments and broader product choices for the Filipinos.

To cut this short, it may be safe to conclude that PH citizens will be willing to pay more, spend
more and buy more simply because of this significant change. For this reason, economic
activities will be active again and spending will be stimulated easily. As the saying goes ‘spend
your money, somebody has to keep our economy going’. This line never gets old and it’s quite a
relief to look at things in simpler and brighter perspective.