Economy can benefit from weak peso if production constraints fixed —Balisacan

The Philippine economy can benefit from the weakening of the peso if production and supply constraints are addressed, Socioeconomic Planning Secretary Arsenio Balisacan said Wednesday.

In a chance interview with reporters at the sidelines of the Philippine Business Conference and Expo (PBC&E) in Manila, Balisacan said that the Marcos administration’s economic managers are closely monitoring the situation, especially how the continued aggressive monetary policy tightening in the US can affect the peso.

The local currency had been depreciating to record lows in the past few weeks and weakened to P59:$1 last week—the 13th time it hit an all-time so far this year—amid continued hawkish signals from the US Federal Reserve. 

At a Palace briefing on Tuesday, Balisacan said that the administration is looking at the economic developments “so that we can deploy our monetary tools such like interest rate for example and how we can intervene in the financial market to tame, including the depreciation of the peso.” 

However, the country’s chief economist said that the economy can benefit from a weak peso as it can make exports competitive.

“You can benefit even more if we can quickly fix our supply bottlenecks, the constraints to production—poor infrastructure, logistics, high cost of power, high cost of water,” Balisacan told reporters at the sidelines of the PBC&E.

“If we can fix these ones then we’d be able to develop more products for exports. That way you can benefit from the weakening of the peso. At the same time, even your local production that can substitute for imports will benefit,” he said.

However, the National Economic and Development Authority (NEDA) chief said losers are industries that heavily rely on imports.

Nonetheless, Balisacan said that the government is monitoring if there are sudden fluctuations in the peso exchange rate against the dollar.

“We don’t want swings… because investors need predictability eh. It will be difficult for an investor to plan if the exchange rate is unpredictable. That’s why it is important if there is stability and predictability,” he said. — BM, GMA News