The peso is unlikely to post a record drop next year, a Cabinet official said on Wednesday, rejecting a research firm’s claim that the currency, which fell to a near 13-year low of P54.13 last week, could plunge to P58:$1 by the end of 2019 given pressures from a widening trade deficit and the government’s “Build Build Build” program.
London-based Capital Economics, in a report released last Friday, said “the trade deficit is likely to widen further as imports of capital goods continue to flood in to support [President Rodrigo] Duterte’s infrastructure drive.”
Budget Secretary Benjamin Diokno, however, called the projection “totally unfounded” and “highly, highly unlikely.”
“We can always come up with a scenario that nobody will go to the Philippines, like SARS. If so, then nobody will go here. But why scare ourselves? We are in a good shape right now,” he added.
An outbreak of Severe Acute Respiratory Syndrome in late 2007 to mid-2008 in Southern China led to trade and travel restrictions in Asia and elsewhere as the disease spread. A total of 775 deaths in nearly 40 countries were blamed on SARS, with two occurring in the Philippines.
Diokno admitted that the “Build Build Build” program was putting pressure on the peso-dollar rate but added that remittances from overseas Filipino workers, business process outsourcing receipts and foreign direct investments (FDI) could be relied on to mitigate the impact.
The country’s trade deficit widened to $3.55 billion in July, the Philippine Statistics Authority reported last week, as a 31.5-percent rise in imports overwhelmed a 0.3-percent exports recovery.
Net FDI, meanwhile, plunged in June from a month earlier but was still higher compared to a year ago, the Bangko Sentral ng Pilipinas (BSP) also said last week.
Net inflows fell by 49.5 percent to $831 million from May but were up 9.2 percent from a year earlier. Year to date, net FDI inflows were up 42.4 percent to $5.755 billion.
Personal remittances, which sum up the net compensation of overseas Filipino workers, personal transfers whether in cash or in kind and also capital transfers between households, totaled $2.675 billion in Jul—up 4.5 percent from a year earlier.
It took year-to-date remittances to $18.462 billion, a 3-percent increase year on year.
The currency returned to the P53:$1 level on Wednesday, gaining eight centavos to close at P53.99 to the greenback.
FROM A REPORT BY RALPH EDWIN U. VILLANUEVA
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