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Monday, January 30, 2006
Banker expects peso to gain more strength
THE Philippine currency is seen to remain at the P52 to P54 range against the dollar in the first quarter of this year and will have a “strong” chance to reach the P49 level, said a bank executive.
“But that will happen if credit rating agencies will change their outlook of the Philippines from negative to stable,” said Wick Veloso, treasurer and head of global markets of Hong Kong and Shanghai Banking Corp. (HSBC)-Philippines.
HSBC held its first economic briefing with its clients in Cebu last Friday at the Shangri-La’s Mactan Island Resort and Spa.
He said while other credit rating agencies give Philippines an unfavorable credit rating, Fitch Ratings is expected to release its view on the Philippines with a possible change of outlook from negative to stable.
Not wait
“If that happens, the international market players are not going to wait for a credit upgrade. There will be more dollar inflow (portfolio investments) that will really push the currency to appreciate,” he said.
He said the peso appreciated because of the implementation of the Reformed Value-Added Tax (RVAT) Law.
“The Philippines has been considered a country that cannot manage its own debt. With that perception, people refuse to hold their money in pesos. They buy in dollars. With the implementation of RVAT, people’s perspective changed—somebody’s taking care now of the economy,” he said.
The implementation of RVAT last November allowed the market to rally, which resulted in the strengthening of the peso, he said.
The government is able to earn as much as P4.4 billion in savings when the peso appreciates, he added.
Lifeline
“Nobody wants higher taxes. But it seemed the only lifeline for our economy. Just like any malignant disease, you need chemotherapy to kill the bad cells first. RVAT will prevent the country from spiraling down,” he said.
The peso will continue to strengthen if the country’s revenue figures are significantly bigger than its expenditures and the government’s budget deficit is lower than expected after the first quarter this year, he said.
When the country has a low-interest rate environment and a continued pouring in of remittances by overseas Filipino workers (OFWs), the food industry will benefit most, he said.
“The real estate market will show signs of improvement, but not a significant (one),” he said.
He said 61.9 percent of OFWs remittances are sourced from the US; 13.4 percent from Europe; Middle East, 13.2 percent; and Asia, 10.9 percent. (ALC)
For Bisaya stories from Cebu. Click here. (January 30, 2006 issue)
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