Saturday, September 18, 2021

External factors, not Duterte

WHILE some investors have been turned off by intemperate remarks made by President Rodrigo Duterte against the United States and the European Union (EU), the country’s major trading partners, the local business community thinks the “political noise” is not entirely responsible for the weakness of the peso and the foreign selling in the market in the past weeks.

They remain bullish on the local economy especially with the economic reforms proposed by the government.

“It is still premature to say that President Duterte’s statements are affecting the economy. The capital outflow and the weakening of the peso are brought about by the external market forces affecting the global economy,” said Glenn Anthony Soco, president of Mandaue Chamber of Commerce and Industry.

“Once these economic reforms are materialized, coupled with the government’s effort to improve the peace and order of the country, we can only anticipate a more robust economy,” he added.

Current market jitters were blamed by some analysts and investors on President Duterte’s war on drugs and his threatening remarks to cut ties with the country’s major allies and trading partners—the US and EU.

However, Bangko Sentral ng Pilipinas (BSP) deputy governor Diwa Guinigundo was quoted in a report saying that “the country’s strong macroeconomic fundamentals have never changed.”

Monetary analysts and economists, in reports said anticipation for the eventual increase in the Federal Reserve key rates is the primary reason for the volatilities in Asian financial markets to date. Other factors also include this week’s meeting of the Organization of Petroleum Exporting Countries (OPEC) in Algeria and the first official presidential debate in the US are contributing to the volatilities.

Some analysts said results of the November 2016 national polls in the US are a cause of concern for business owners since both candidates back policies that would give more opportunities to US residents.

“We have been experiencing net foreign selling in the market in the past weeks but numbers show that this has slowed down following the recent meeting of the US Federal Reserve. Perhaps it is also an indication of fund managers locking in gains, as the PSEi has delivered double-digit returns since the start of the year,” said Philippine Stock Exchange president and chief executive officer Hans Sicat.

Budget Secretary Benjamin Diokno does not consider the weakening peso “a big deal.”

“Well, the depreciation of the peso is, as far as I am concerned, no cause for concern,” he said in a press conference. “The depreciation of the peso is a result of the strengthening of the dollar more than the weaking of the peso.”

On Monday, it was reported that the Philippine peso hit a seven-year low in heavy trading as importers’ dollar demand added to downward pressure stemming from stock outflows.

Reports said the peso lost 0.60 percent to P48.26 per dollar, its weakest since September 2009.

As the peso weakened against the US dollar, Diokno noted that the families of Filipino migrant workers and the exporters would benefit while importers would suffer from it.

Diokno said the depreciation of peso would not take very long as the Bangko Sentral ng Pilipinas is now looking at the situation.

He, however, stressed that the administration’s policy stance in economics would be retained.

Diokno said there was nothing to worry about because the country has enough gross international reserves, which could suffice the 10-month import requirements.

“Right now, the gross international reserves with the Central Bank is at $85.7 billion. That’s equivalent to 10 months of our import requirements,” Diokno said. With Sunnex
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