‘Rody not to blame for weaker peso’

By Giovanni Nilles and Prinz Magtulis (The Philippine Star), September 28, 2016

MANILA, Philippines – Global market forces, not President Duterte’s anti-drug war policy nor his verbal attacks against western leaders, caused the weakening of the peso against the dollar and the extended losses in the Philippine stock market, Budget Secretary Benjamin Diok­no said yesterday.

Diokno, an econo­mics professor at the University of the Philippines, said the peso skid is simply a “result of the strengthening of the dollar more than the weakening of the peso.”

He said the strengthening of the American currency is mainly due to the “impending increase in the interest rate by the Federal Reserve (US central bank),” a move to “make it more attractive for hot money to go back to the US.”

He added the same factor spooked the local stock market.

“You know, when (US Federal Reserve chair Janet) Yellen said they might soon raise rates, that caused stock market decline because hot money was flowing out,” Diokno said.

“Portfolio investments are naturally unpredictable, as investors are in constant hunt for more profitable stocks,” House committee on appropriations chairman and Davao City Rep. Karlo Alexei Nograles said in a statement yesterday, agreeing with the budget chief.

“It’s not abnormal for hot money to flow out,” Diokno said. “In fact, I think they have already overstayed, adding that better capital inflows like foreign direct investments (FDI) “will continue to grow.”

“The country’s economic fundamentals remain very strong and with Duterte’s commitment to bring order in the streets and finally end the country’s multi-pronged insurgency problem, the Philippines will emerge stronger as one of Asia’s primary hubs for FDI,” Nograles said.

Nograles said an early approval of the P3.35-trillion national budget for 2017 and the granting of emergency powers for the President to solve Metro Manila’s traffic woes, a major turn-off among foreign investors, would give the economy a much-needed stimulus.

“The national expenditure program is not only a budget for change,” Nograles added. “Large portions of the budget are for infrastructure projects that would expand the country’s investment potentials in other regions including Mindanao which has long been neglected in terms of development.”

He said the Duterte administration is ramping up implementation of public-private partnership projects that have been left idle, especially those for infrastructure.

The budget chief said to boost the economy, the government is set to spend at least P8.2 trillion for public infrastructure projects within Duterte’s six-year term, where work will be on a 24/7 basis, with strict monitoring and without corruption and red tape.

Peso level still comfortable

Describing the current peso level as still “comfortable” and no cause for concern, Diokno said, “If you compare the peso’s performance with the rest of the region, it’s really not that bad, and it’s really due more to the strengthening of the dollar.”

“At one point, we even hit P55 (to a dollar), and we are okay,” he said.

“We got a good program, the ten-point agenda of the President, you focus on the economic fundamentals – they’re pretty good,” he added. “So, if I were an investor, I’ll see the forest, not the trees.”

OFW families end up gainers

As the condition prevails, Diokno pointed out that there would always be winners and losers.

The winners, he said, include the family members of overseas Filipino workers (OFWs), who stand to gain from the higher value of money sent by relatives abroad.

Exporters also stand to gain from the depreciation, he said, adding those who crave for imported products will be among the losers.

He also allayed fears of higher inflation due to the weakening of the peso.

“The other fear that the depreciation will result in higher inflation –again, that is misplaced,” Diokno said. “Our inflation target is two to four percent. We are much lower than that. The last time I checked, it was at 1.4 percent.”

He stressed that there is no need “at the moment” for the government to change its policy stance at the moment or react to the depreciation at current level. – With Delon Porcalla, Alexis Romero