Rep. Joey Sarte Salceda of the House Ways and Means Committee sees the peso falling to as low as P65 to P68 to $1 in the near term and President Marcos can survive this currency crisis by doing what his father, the strongman Ferdinand Marcos Sr. did in the 1970s.
Marcos Jr. should focus on dollar earners and local food producers to survive the imminent plunge to this level, he said.
“Depreciation in the early 1970s, by 41 percent, even led to an eventual boom in Philippine exported commodities (coconut and sugar) by 1974,” Salceda said in a statement.
With the Bangko Sentral ng Pilipinas virtually helpless in defending the peso, Salceda said the government has no choice but to earn more dollars if the peso continues its slide after falling to an all-time low of P58.49 on September 22.
“We can’t raise rates too aggressively without sacrificing economic recovery because the currency depreciation isn’t primarily our fault. We can’t do much to protect the peso.”
Maximize earnings from OFWs, BPOs
Instead of being hawkish, Salceda said the government should maximize earnings from overseas Filipino workers, business process outsourcing companies, freelancers employed by foreign companies (such as virtual assistants, independent creatives and PR people, and designers), and tourism, reported business blog site, Bilyonaryo.
Marcos’ father also initiated the deployment of Filipino workers to the Middle East during the oil boom in 1974 which helped ease the impact of the peso depreciation during the period.
Reduce dependence on imports
Sacleda said more than ever, Marcos should focus on strengthening the agriculture sector to reduce dependence on imports (24 percent of the country’s food requirements come from abroad).
“Lowering domestic food prices and reducing the need to import will help insulate us from imported food inflation. It’s a security blanket, especially since there are threats to the price of imported rice (due to China droughts),” said Salceda.
The surging dollar beat the peso into submission as the US Federal Reserve’s rate hike continues to reign king in global markets.
The local currency’s finish on Tuesday, at P58.99 against the greenback, was weaker than its previous close of P58.5, marking a new record-low, said a Philippine Star report.
That said, the peso's decline kept pace with the Philippine Stock Exchange's lowest level this year.
As it is, the peso's continued decline is foreboding for a Philippine economy reeling from imported inflation driven partly by expensive oil. The Philippine economy is also looking to regain economic momentum as it recovers from pandemic fallout in the past two years.
Domini Velasquez, chief economist at China Banking Corp. attributed the peso’s decline to the market’s delayed reaction on the dollar.
“The peso's new high today may be a delayed reaction from yesterday's movement globally, where currencies of developed and developing economies plunged amidst broad dollar strength,” she said.
Data from the Asian Development Bank showed that the peso has depreciated by 11 percent since the end of 2021, which caused the costs of goods and services to rise since businesses and firms would need to spend more for their importing needs. To recoup their expenses, they would pass on the burden to consumers.
“Although the peso is testing the 59-levels, and may even test 60, we think that the dollar's strength may likely be nearing its peak,” Velasquez added.
That said, the Bangko Sentral ng Pilipinas mirrored the US Fed’s actions to quell inflation. Interest rates in the country currently stood at 4.25%, which banks use as a benchmark when they lend to consumers and businesses.
“Structural flows such as remittances and upcoming IPOs may provide some support to the peso,” said Velasquez.
"There are many structural factors driving the US dollar higher right now, growth in interest rate differential, tighter global liquidity is also very supportive of the US dollar…with that persistent dollar strength backdrop, the risk remains on the upside for the dollar against Asian currencies," said Manulife Investment Management head of Macro Strategy Sue Trinh.
Asian currencies, including the peso, are likely to continue to decline as the Fed proceeds with more interest rate hikes that in turn, will widen the interest rate differential, Trinh said.