Villanueva, Bernadeth A.

BSMEt 1-A
GEC MMW DATE:

MONEY AND CURRENCY

Activity 21

I. Introduction

Money is a medium of exchange that is widely accepted in payment for goods and services.

Currency is a specific type of money that is issued by a government or central bank and is typically made

up of physical notes and coins. Different countries have their own currencies, which can be traded and

exchanged with other currencies on foreign exchange markets. The value of a currency can fluctuates

based on a variety of economic factors, including interest rates, inflation, and trade balances. In the

Philippines, there is a mixture of old and contemporary financial institutions, making up a complex and

dynamic financial system. The global economy is heavily reliant on money and currencies, which have an

impact on people, businesses, and entire nations. The strength of a nation's economy has a direct

impact on the value of its currency. A strong currency can be a sign that an economy is robust and

appealing to investors, which encourages more foreign investment and boosts economic growth. On the

other side, a weak currency might be an indication of financial difficulties, making a nation less appealing

to international investors and thus slowing down economic growth.

II. Contents

In the Philippines, there is a mixture of old and contemporary financial institutions, making up a

complex and dynamic financial system. The management and stability of the country's monetary system

are mostly under the control of Bangko Sentral ng Pilipinas BSP, the central bank. The Philippine peso

abbreviated PHP is the country's official unit of currency and is divisible into 100 centavos. The BSP

oversees managing the country's monetary policy and is responsible for issuing and controlling the peso.

To ensure the stability of the peso, the BSP carefully monitors inflation and exchange rates. The
Philippines ranks among the top nations in the world for the amount of remittances it receives, with a

significant share of these remittances coming from abroad Filipino workers. To guarantee the security

and safety of these transactions, the government has put in place laws and rules.

Due in large part to the COVID-19 pandemic, which forced people to move their transactions

online, the nation has also experienced remarkable growth in recent years in digital financial and mobile

banking services. Global demand for goods and services, particularly those made in the Philippines, fell

because of the COVID-19 epidemic. Due to this, the nation's exports declined, which reduced the influx

of foreign cash and consequently decreased demand for the peso. A key source of foreign cash for the

Philippines, remittances from Filipinos working overseas also decreased as a result of the decline in

economic activity. These elements played a role in the peso's depreciation. Here are computations and

ideas on how flow of concern affected the economic growth during the pandemic here in our county.

1. A Filipino export company that sells goods worth $100,000 a month. Before the pandemic, the

exchange rate was 1 USD = 50 PHP, but during the pandemic, the exchange rate decreased to 1

USD = 55 PHP.

 Before the pandemic: $100,000 x 50 PHP/USD = 5,000,000 PHP

 During the pandemic: $100,000 x 55 PHP/USD = 5,500,000 PHP

Impact: The company would now receive 5,500,000 PHP in peso, 500,000 PHP less than before the

pandemic.

2. A Filipino business that has a loan in USD, with a principal amount of $100,000 and an interest

rate of 5%.
  Before the pandemic: $100,000 x 5% = $5,000

 During the pandemic: $100,000 x 5% = $5,000

(Remains the same, but now worth 275,000 PHP at the new exchange rate)

Problems arise in these significant impacts on the country's economy and the value of its

currency has plummeted to these factors. The export decline in foreign cash inflow and exports are two

possible effects of a decline in demand for Philippine goods and services. This may result in less demand

for the peso and a decline in the value of the currency. A decrease in economic activity can also lead to a

decrease in remittances from Filipinos working abroad. This can also contribute to a decrease in demand

for the peso and a depreciation of the currency. As they would now have to pay more in peso terms,

businesses and individuals that have loans with foreign currency as the collateral will find it more

difficult to repay them. Due to this, both firms and people may experience defaults and increasing

financial distress.

These problems can make firms and investors less confident, which might result in less

investment, slower economic growth, and a general decline in the level of living in the Philippines.

Additionally, a decline in the value of the currency may cause inflation as the cost of imported

commodities rises, pushing up consumer prices. This can result in less money in your pocket and a lower

standard of living. The COVID-19 pandemic's difficulties might significantly affect the Philippine currency

and economy, with detrimental effects on enterprises, people, and the nation as a whole. In order to

lessen the negative effects, officials must take steps to reduce these effects and stabilize the economy.

III. Economic Value

For a nation's total prosperity and well-being, like the Philippines, its economic value is crucial. A

robust economy may offer its residents chances for development, job creation, and higher living

conditions. The Philippines is renowned for being a significant source of skilled labor, notably for
information technology, business process outsourcing, and other service-related industries. Growth has

prospered the economy significantly thanks to these industries, which also help create jobs. The nation's

abundant natural resources and tourism potential are significant assets that can be crucial to the

country's economic success. In addition to producing jobs and revenue, the growth of these industries

also provides sustainable growth, which can serve to raise the citizens' standard of living. In conclusion,

the economic strength of the Philippines is essential to the country's overall development. A country's

population may be able to create jobs, raise their standards of living, and pursue sustainable

development with the help of strong economic growth. For the economy to continue to be strong and

sustainable, the public, private, and general population should unite.