Cebu biz leaders to gov’t: Address weakening peso
The government should address the weakening peso which has dropped past P54 against the US dollar level and has affected businesses in the country including that of Cebu.
Antonio Chiu, Cebu Chamber of Commerce and Industry (CCCI) president, and Stanley Go, Mandaue Chamber of Commerce and Industry president, made this call amid an Inquirer report on a London-based Capital Economics’ report expecting the peso to reach P58 against the US dollar in 2019.
According to Chiu under normal situations, a weaker peso would mean lesser imports and more exports and would mean also higher remittances from overseas Filipino workers (OFWs).
Yet Chui said that the data from National Economic and Development Authority (NEDA) shows that in the last six months the imports have been increasing and exports have been decreasing contrary to the normal thinking that a weaker currency will encourage more exports.
“And this is happening at a time when the exports of our ASEAN neighbors are increasing,” Chiu told Cebu Daily News in a text message on Tuesday.
Chiu said that the weaker peso had also adverse effects to the inflation rate which already topped 6.4 percent climbing above the market estimate of 5.9 percent and which had been the highest rate since March 2009 due to a jump in the cost of food and non-alcoholic beverages.
“The most important commodity affecting our commerce and development market is the price of rice. This commodity has been totally mismanaged resulting into very high prices and which will lead to social unrest if not addressed immediately,” said Chiu.
“Our government should hold the public officials accountable to the people and not just allow them to resign,” he added.
For MCCI’s Go, the situation is very challenging as most industries in Mandaue City rely heavily on importation.
“This will bring the cost up and put pressure on a lot of businesses to pass on the increasing costs to consumers,” Go told Cebu Daily News.
Go said that businesses would have to find alternative cheaper materials or to improve production efficiency through application of new technologies to hold off any increase in consumer prices.
Steven Yu, MCCI vice chairman, said that the peso would go back to P53 (against the dollar) by the end of the year since the remittances had recovered and had grown to 4 to 5 percent in August indicating a robust inward cash flow.
Yu said that although the imports had increased due to the massive movement on infrastructure by the administration’s Build-Build-Build (BBB) projects, they would not be the sole indication of the economy’s downward movement.
“It is just a matter of timing and a confluence of events that led to it. Our fundamentals remain rock solid,” Yu said in a text message.
According to CCCI’s Chiu, the BBB projects had only contributed a small impact on the exchange rate, and these projects would be necessary to make the Philippines more competitive and attractive to foreign and local investors.
“What will affect business more is an erratic exchange rate and the cost of doing business in the Philippines,” said Chiu.
Yu said he believed that the situation would not last long and that Mandaue City would be expected to ride out the problem.
“Businesses have to persevere, and help in whatever way they can increase economic activities and provide employment. This will keep the economy going,” said Yu.
Yu also encouraged businesses to increase productivity, to pool resources, and to innovate.
“The ‘-ber’ months has already started and we should take this opportunity to lighten up the mood, and continue to believe that things will correct itself,” he added.
Although the peso is forecast to weaken even more to P58 next year, Chui said that predictions would not usually happen.
“But yes, we have to learn and be prepared with a weaker peso,” said Chui.
Meanwhile some industries such as the export industry and the business process outsourcing (BPO) industries are not at all bothered by the weakening peso.
For Federico Escalona, Philippine Exporters Confederation, Inc. (PHILEXPORT) Cebu executive director, Filipino exporters would benefit with the current exchange rate if the demand for the Philippine goods would rise as they will get more for the US dollar receipts.
“However, we have been in the negative territory 5 months out of 7. Hopefully we can recover in September until December. On the downside we will be servicing our debt at a higher cost,” said Escalona.
For Escalona, if the exports recover, the prediction of P58 to a dollar next year will be beneficial to the exporters.
“However, I am concerned over the state of the economy as we pay USD (US dollars) for oil and service our debts with US dollars,” said Escalona.
He also advised exporters to re-strategize, innovate and rebrand in order to gain more foreign orders.
As for the BPO (business process outsourcing) industry, Wilfredo “Jun” Sa-a, Cebu IT BPM Organization (CIB.O), said that the dollar devaluation would be advantageous to the industry in terms of profit with BPOs being an export industry.
“But at the same time the devaluation will have an adverse effect for its employees since just like any employee, they are paid in pesos,” said Sa-a.
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