The peso should be allowed to depreciate to about P55 to the dollar to boost local consumer spending and to improve the country’s export competitiveness, an economist said at an exporters’ forum on Thursday.
According to economist and former Budget Secretary Benjamin Diokno, a foreign exchange (forex) rate of around P55 a dollar would create a fiscal stimulus that would pump-prime the Philippine economy amid an ongoing economic downturn.
Now an economics professor at the University of the Philippines in Quezon City, Diokno explained that the depreciation of the peso would encourage more overseas Filipino workers to send more money back home. With a bigger value for their money here, he said, recipients of the remittances would get to spend more. The Philippine economy is still mainly driven by consumption, Diokno added.
“Then, when the local business sector sees that consumers are willing to spend, they would be more confident to invest in and drive our economy,” he told reporters at the sidelines of the forum.
Diokno said that the Bangko Sentral ng Pilipinas should refrain from defending the peso from further depreciation. “We should never allow the exchange rate to reach P40 to a dollar.”
He suggested that the central bank leave the foreign exchange on its own, or to fix the exchange rate at P55 per dollar.
Diokno said that such rate can be maintained just momentarily until the global economy stabilizes.
He added that the government’s focus on infrastructure spending would not get moving the effort to shield the economy from the crisis.
“Most infrastructure projects take a lot of time before they are finished and utilized,” Diokno said. “We need to pump-prime the economy now.”
Added businessman Aurelio Angeles, also a speaker at the forum, “Let the peso seek its own level, at P55 or beyond to a dollar. Such would benefit exporters as we could lessen the prices of our exports to foreign markets.”
He said the strong peso makes Philippine export products more expensive, hence less competitive in terms of pricing, in global trade wherein the dollar is still the main currency used for transactions. –Ben Arnold O. De Vera, Reporter, Manila Times