For many months during the previous PNoy Aquino administration, the dollar-peso exchange rate stood at $1 to P46. About the middle of last year, it started moving in favor of a costlier dollar. After lingering awhile at P49, the peso value surged past P50 last December, then P51 per dollar this month. The peso is expected to continue depreciate further and Metrobank Research said the exchange rate should hit $1-P51.30.
By way of history, the exchange rate started at P2 to the dollar at the time the US let go and recognized Philippine independence in 1946. It was P4 during the Macapagal administration, P6 during the early Marcos administration, becoming P20 by the time of the EDSA Revolution in 1986, P27 during the coup attempts against the Cory Aquino administration in 1989, P41 in the Asian Financial Crisis of 1997, then a steady decline in succeeding years until today’s P51 to the dollar, and counting.
We hardly notice the effect of changing exchange rates on ordinary people’s everyday affairs, but we should know that these affect the lives of different people in so many ways. We must now be attuned to the rate changes, whose effects are bound to affect our lives, some more critically than others.
Among these expected effects are:
The lowering of the peso’s value in relation to the dollar will benefit our Overseas Filipino Workers (OFWs) who earn in dollars, which, when remitted to the Philippines, mean more pesos for OFW families. They will thus have more money to spend – more business for malls and restaurants, for purchases of condominium units and other real estate, for cars, etc.
On the other hand, a lower peso value means importers need to pay more in pesos to purchase the same goods denominated in dollars. We can expect costlier imported cars, imported luxuries, and – most important of all – imported fuel. Costlier gasoline and diesel means costlier transportation costs for food, therefore higher food prices. It could lead to higher fares, as bus, jeepney, and taxi operators agitate for higher fares to make up for their fuel costs.
For the national government, a lower peso value means it needs more pesos to pay for debt servicing but this is reportedly not too great a concern because we have considerable foreign reserves of $80 billion. The greater effect will be on the government’s planned infrastructure program this year, which needs construction materials which are now costlier.
Economists think the economy will be all right if the weakening peso will settle down at P51.30 per dollar. More than this and some sectors of the economy will unduly suffer. We thus hope that the strengthening of the US dollar – over which we have no say – will now abate, lest our economy and our people suffer unduly.
