Peso strength seen halving export growth

BPO firms start feeling pinch of strong currency

MANILA, Philippines—With the peso breaching the 42-to-a-dollar level, export growth may be halved over the next three years, forcing more companies in the sector to downsize and even close shop.

In an interview Friday, Philippine Exporters Confederation Inc. President Sergio Ortiz-Luis Jr. said the projection of an annual growth of at least 25 percent over the next three years might be reduced to just around 10 percent a year if the peso-dollar exchange rate remained in the 42-43 levels.

Exporters, even those in the electronics sector who are generally more resilient to currency appreciation, would be placed in even more dire straits should the peso gain more strength in the coming months, he said.

He noted that at 46 to a dollar, many exporters, especially the small ones, were forced to downsize and even cease operations. At the 45 level, the electronics sector also began to feel the squeeze, dropping some of their product lines as exports became uncompetitive. With the exchange rate now at the 42-43 range, even business process outsourcing (BPO) firms were beginning to re-examine their expansion plans.

“We have to go back to the drawing board to review our projections. The last survey we conducted was three months ago when the exchange rate was around 46 [to $1]. At that level, we could have doubled our exports over the next three years. But with this new development, we’ll probably just grow by around 10 percent a year over the next three years,” he said.

This year’s growth was already set at 25 percent, he said, and that was expected to materialize even with the significant appreciation of the peso. The industry was hoping to maintain this level of growth from 2011 to 2013, but this did not seem likely given the recent developments on the exchange rate.

Trade Secretary Gregory Domingo had nothing to offer exporters in terms of relief as he said the movement of the currency was driven mainly by investment inflows, overseas Filipino worker remittances and other market forces.

“Over the medium term and even the short term, it’s hard for the government to control the level of the peso. The government doesn’t have enough money to control the appreciation or depreciation of the currency,” he said.

“The appreciation of the peso is not necessarily a bad thing as it is also a reflection of the confidence of investors in our economy. What the [Bangko Sentral ng Pilipinas] is doing is trying to control the volatility than the direction of the currency,” he added. –Abigail L. Ho, Philippine Daily Inquirer