Peso losing its competitiveness – DBS

[Ronzkie23]

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Peso losing its competitiveness – DBS

By Prinz P. Magtulis, The Philippine Star
Posted at 01/06/2013 3:56 PM | Updated as of 01/06/2013 3:56 PM

MANILA, Philippines -- The peso is losing its competitiveness as a currency with its steady rise, adversely affecting the dollar earnings of the export and business process outsourcing (BPO) sectors, an investment bank said.
Singapore-based DBS Ltd., in a research note, said the peso has appreciated by 6.1% against other major currencies such as the dollar and the Japanese yen. On a real effective rate basis, the local unit recorded a faster strengthening of 7.3%.
The real effective exchange rate takes into account the effect of inflation on trimming the value – in effect, the purchasing power – of the currency.
“Accordingly, this also constitutes an erosion of competitiveness. The performance of the export sector in the coming quarters will bear watching,” DBS economist Eugene Leow said in the report.
Tagged as Asia’s second best-performing currency last year, the peso has appreciated by 6.8% against the greenback in 2012, data from the Bangko Sentral ng Pilipinas (BSP) showed. The local unit also started this year with a bang, achieving a 58-month high of 40.77 last Thursday.
In a speech late last week, BSP Governor Amando Tetangco Jr. reiterated that the peso, which closed at 40.91 versus the dollar on Friday, remained competitive despite saying that the central bank will continue buying more dollars to temper its strength.
“We are looking at what is happening on exchange rates of other countries… Based on that, the peso has remained within the middle of the range of currencies in the region,” Tetangco said.
Leow agreed with this, but warned that the continued currency strength beyond current levels may prove to hurt export and BPO sectors. A strong peso also slashes the value of dollar remittances from overseas Filipinos.
“Broadly speaking, I think the Philippine economy is still competitive. But further strength from these levels may place strains on sectors such as the BPO and manufacturing,” Leow said in an e-mail.
“BSP’s recent moves are considered to be relatively mild, more stringent forms may be required if inflows persist,” he said, pertaining to central bank regulations unveiled last year targeted at tempering capital inflows.
Leow cited some of those measures in his report: the ban on foreign funds in special deposit accounts (SDA), the succeeding lowering of SDA interest rates, both in July; and the cap on non-deliverable forwards for banks announced last month but will only take effect in March.
“These measures come on top of the accumulation of foreign reserves and foreign reserves forwards over the past year,” he pointed out. Dollars bought by BSP normally pile up in the country’s foreign reserves.
“All these reflect increasing concerns on the strength of the peso from a competitiveness perspective,” he added.
In the e-mail, Leow said: “Peso strength can help to mitigate inflationary pressures. However, this has got to be balanced against competitiveness.”

Source: Peso losing its competitiveness

[Tirong-say]

We are not yet globally competitive in terms of commerce
and trade. In a country like ours which depended more on
cash flows from exports and remittances of OFW's abroad
is way detrimental simply the inflows will lost it's impact
towards the economy.

[rickflag]

We are slowly beginning to experience the negative impact of strong peso. Unya wa gihapoy buhaton ato govt ani? Unsa ila huwaton nga mang pullout na ang mga BPO diri sa atoa ug mamalhin sa India our real competitor in BPO?

[balipseyev]

Kung musaka ang value sa Peso reklamo, kung munaog ang value reklamo gihapon....

[DEMONOCIETY]

Kung musaka ang value sa Peso reklamo, kung munaog ang value reklamo gihapon....

pinoy pa imo #1 REKLAMADOR

[monroy]

Kung musaka ang value sa Peso reklamo, kung munaog ang value reklamo gihapon....

Uu.. dapat happy lang ta nga walay paki ang atoang gobyerno! ipabagsak lang nato ang BPO, OFW, exporter. More power sa positive thinking bahala nag daghan ma bankrupt. pakpak ko ani...

[masakiton]

pinoy pa imo #1 REKLAMADOR

i disagree
dili ang pinas ang nag gunit ana nga title

[monroy]

The level of complaint is commensurate with the level of lousiness of government and hence apt.

[reptoid]

I'm wondering why (if the peso is so strong) are goods so much more expensive here than overseas? I've been doing some shopping lately and many items in the USA sourced from China are between 20 & 60% more costly if bought in Phils. It seems that whatever economic statistics are thrown our way the only thing we can be sure of is that we as consumers are forever getting a bad deal.

[krishnu shivaq silquin]

hahay... huna huna.a sad tawn ninyo oi... na naa pud tawn local workers na malipay na modako ang value sa peso... dili lang ang ofw mo matter or kanang nag.agad nga mo ubos pagma.au ang peso... kahibaw kaha mo unsay mahitabo sa pinas kung palabi.an ug pugong sa gobyerno para lang maluwas ang ofw ug uban pang nagsalig ana... walay kalambuan... yeah daghan trabaho kunuhay pero ang purchasing power sad sa peso ang lo.oy... though maka.ingon mo na maau lagi unta mobarato ug mosaka ang value sa peso... yeah it will man jud kung stable na sad ang changes labi na kung moabot ug P36 to a dollar and will remain ingon for a long period of time...