Donna Mae Alaga 
Philippine (PH) currency exchange rate depreciates to 57.48 against one dollar on last September 20. This is 8 centavo lesser than 57.4 on September 19, 2022. Economic experts link this depreciation to the increasing prices of commodities due to low supply than demand, and Federal Reserve`s recent monetary policy of potentially increasing interest rates. Although the Bangko Sentral ng Pilipinas (BSP) adopted a free-float system in exchange rates since 1970, pressures of inflation still bring harsh influence on the current monetary systems and eventually our currency value.
Albeit the BSP viewed this recent depreciation as the strengthening of the dollar instead of the other way around— weakening of the peso, it would not change the fact that the depreciation of the peso brings many ramifications on the Philippine economy amidst the transition to “new normalcy” from COVID-19 pandemic.
Lesser Imports
With the uncertainty on the supply of some basic commodities, sugar for instance experienced 26.0 percent annual increase in prices, where the present administration purposely resorts to importation, this current depreciation of the PH peso may encourage reliance on our own industrial outlets as importation would only exacerbate the costs of production. Based on the Year-on-Year Growth Rate (%) of Imports, import value increased at an annual rate of 21.5 percent which is equal to 12.14 billion (USD) in July 2022. Moreover, foreign goods and services would become expensive. This in turn urges suppliers and manufacturers of basic commodities to retrieve alternatives, which are cheaper, from local producers. Hence, to avoid further acceleration of prices at domestic market, lessening the imports may be conducive, especially to the country`s exchange rate, as the peso depreciates.
Opportunity for local Investments
Although the depreciating peso may discourage foreign investors due to fear of poor return of sales and profits, this time seems to be in favor for local investors to counteract the loss of international investments. Instead, foreign exporters will be attracted as exporting costs from our country becomes cheaper. The weakening of the peso may also decrease the intimidation brought by foreign investors on local industries. Based on the Total Approved Investments by Nationality, on the 2nd Quarter of 2022, Filipinos invested 62, 351.76(in pesos) compared to 22,502.74 by foreign nationals. Hence, domestic firms, as well as exporters, may find peso depreciation as advantageous for their economic growth while the value of peso compare to dollar remains lower.
Impact on the PH annual budget
Since depreciation was also caused by weak cash inflows in our country, the release of the PH budget may benefit from this. “…, the impact of the depreciation is actually favorable to the budget because a one-peso depreciation would mean higher revenue for the government”, Benjamin Diokno said during the Development Budget Coordination briefing to the Senate of the PH on the fiscal year 2023 proposed budget. It means, according to Diokno, 7.6 billion will be reduced from our budget deficit of 86.8 billion in July 2022. Thus, the weakening of the peso would alleviate the deficit on our budget as we raise more revenue than expenditures.
It seems that the depreciation of the peso was treated of least importance during these times especially when average Filipinos even struggle to allocate minimum wage to fill in some of their basic needs, which are inherently increasing in prices exponentially.
Isn`t it time for us to look at the supposed weakening of the peso in the lens in which an era where our local industrial base could start to flourish? It is then hoped that the surge of competent domestic industry doesn`t require us to wait for our currency to depreciate before we actually urge the need to achieve economic independence.
Donna Mae Alaga | Editorial Writer
Christ Palmiano | Editorial Cartoonist
Jay Gabunar | Layout Artist
