PESO APPRECIATES VS. US DOLLAR
The Philippine peso has risen in value vis a vis the US dollar from the January 2 rate of P50.80 to P48.48 this September, up by 4.5 percent making the strongest currency in Asia even with the devastating economic impact of the COVID-19 pandemic.
Finance Secretary Carlos Dominguez III attributed the peso's strength to the mild inflation rate in the country plus the balance of payments (BOP) surplus reflected in the record-high gross international reserves of $98 billion as of end-July.
The Bangko Sentral ng Pilipinas (BSP) had reported an overall BOP surplus of $80 million in June 2020, a reversal from the $404 million BOP deficit recorded in the same month last year resulting in the uptick in the foreign currency reserves.
Dominguez said confidence in the Philippine economy and the local currency are also among the factors that have raised the value of the peso against the US dollar.
The drop in the country’s imports as compared to its exports during the strict lockdown imposed by the government to contain the spread of COVID-19 has led to an overall favorable BOP position, which contributed to the strong performance of the peso, Dominguez noted during the recent virtual “Captain Speak” series of Maybank’s Invest ASEAN Conference 2020.
“(Second), because we were able to tap the foreign loans first from the multilateral agencies and then later from the bond market at very favorable terms, we have increased the size of our foreign reserves. In fact our foreign reserves now is at roughly $94 billion.
This is actually larger than our total foreign debt,” Dominguez said in response to a query on why the Philippine peso has remained strong amid the COVID-19 crisis, during the Maybank event he said.
The high GIR level is equivalent to 8.9 months’ worth of imports of goods and payments of services and primary income, and is about 7.5 times the country’s short-term external debt based on original maturity.
If based on residual maturity, the GIR is 4.9 times the country’s short-term external debt, according to the BSP.
On top of these factors, Dominguez said the Philippines’ low inflation rate of 2.7 percent as of July this year also contributed to the rise in the peso’s value against the US dollar.