Tuesday, November 28, 2006 Peso to stay at P50 by yearend - economist
THE government may have washed its hands of the appreciation of the peso to the dollar, but the peso is expected to settle down to around P50 to the dollar by the end of the year, an economist said.
A decline in the remittances of overseas Filipino workers (OFWs) in December is another reason that the peso will not go down further, said economist Bernardo Villegas, vice president of the University of Asia and the Pacific.
“The exchange rate will deteriorate to around P50. I warn you not to be swayed by so much on the euphoria of a strong peso,” he said. The peso is expected to decline to the P48 level.
Villegas said, in an economic briefing at the Casino Español de Cebu last Saturday, that President Glora Arroyo’s programs of building infrastructure such as roads and airports will rein in the peso to the P50-level, a value favored by exporters.
Competitive
Allan Suarez, president of the Philippine Exporters Confederation (Philexport) Cebu, said, in a separate interview, that the P51-value is the exchange rate exporters have requested the government to maintain for exporters to become competitive. “But the more important thing is its (value) stability and consistency,” he said.
Exporters in Cebu had asked the government to control the appreciation of the peso to the dollar because this has adversely affected the industry by giving them no choice but to increase the prices of their products in the global market.
The government lamented it could not do so, as the country has been adhering to a free market, including on foreign exchange.
Equipment
But Villegas said the infrastructure projects of the government will require heavy equipment that are not manufactured in the country.
“This means that we have to import these equipment. A lot of dollars will have to be consumed. The demand for dollars will increase from now until election. Thus, the value of the dollar will go up,” he said.
With regard to the dollar remittances of OFWs, Villegas said the usual increase in the remittances in December will not happen this year, as the remittances of OFWs have been spread throughout the year.
Aggressive
This is largely due to the aggressive marketing to OFWs of real estate developers.
One of the major reasons OFWs send more money in December is for their families to construct or buy a house, he said.
“In the past, OFWs are not the major target of real estate developers. But now, they are selling (aggressively) to OFWs anytime of the year,” Villegas said.
Earlier, Rep. Joey Salceda, economic adviser to the President, said the increasing value of OFW remittances, especially in December, will increase the peso’s value to P44.
Villegas said the P50-value of the peso is favorable to the country’s economy, which is export-dependent.
“Let us follow China’s lead. China has not appreciated the Yuan, even with the demand of the US. The Yuan is undervalued at 30 percent.
China maybe a bad example of democracy, but it has been managing its economy well,” he said. (JBN)
