Duterte economic managers say weak peso good for PHL

Economic managers on Sunday urged the public not to worry about the depreciation of the peso, noting that this has several benefits such as higher tax revenues.

Finance Secretary Carlos G. Dominguez III said that given the depreciation of the peso, the increase in imports of capital goods translates to higher revenue collections for the Bureau of Customs (BOC).

"Our imports have been increasing, and the reason they are increasing is mainly not for consumer goods but for capital goods," he said.

"So there are more factories being set up and more equipment, especially electrical equipment, being imported," he added.

According to the latest data available from the Philippine Statistics Authority (PSA), the Philippine balance of trade widened 31.7 percent to register a deficit of $2.302-billion in March versus the $1.747-billion deficit the same month last year.

The peso, meanwhile, closed Friday last week at P49.760:$1. Prior to this, however, the peso breached the P50.00:$1-level in February, the weakest in 10 years, depressed by prospects of higher interest rates in the US.

Dominguez noted that the country's business process outsourcing (BPO) sector also stands to gain from the depreciation of the peso.

"So a one-peso depreciation means there is P50 billion more of potential demand. And as you know, this money goes into buying apartments, educating the kids, buying cars. So it's actually beneficial to us, more beneficial I think than negative," he said.

This was mirrored by Budget Secretary Benjamin M. Diokno who said that a one-peso depreciation would yield a net gain of P7.2 billion for the state coffers, as revenues will increase by P9.2 billion while foreign debt service will have a corresponding increase of P2 billion.

"So the net gain will be P9.2 billion in additional revenues minus P2 billion in higher debt services, (which gives us) P7.2 billion," he said.

"As the peso depreciates, the OFW families will have more money in their pockets, they will use that to consume. But part of that also will be recovered in terms of higher value-added tax (VAT) collection because value-added tax is a tax on consumption. So it's a net gain," he added.

For his part, Trade Secretary Ramon M. Lopez said a weaker peso would also act as protection for local industries and a boon for exporters.

"As we have experienced in the manufacturing sector, as long as the depreciation is gradual, the depreciation is also benefiting and increasing consumption spending," he said.

"It spurs economic activity, more purchases, as we've experienced a consumer spending uptrend whenever there is a depreciation," he added.

According to the PSA, the Philippine manufacturing industry grew for the second consecutive month in terms of value and volume in March from a year earlier.

Looking ahead, Dominguez said that they will continue to monitor and assess the developments, as fiscal managers are "looking at the peso depreciation carefully, and are aware that the peso has depreciated over the last few months."

The country currently has a debt-to-GDP (gross domestic product) ratio of 40 percent, bringing the country to "a very good position debt-wise."

"The traditional rule of thumb is that if you have a debt-toGDP ratio of 60 percent or lower, you're in good shape," he said.

The government has set an economic growth target range of 6.5 to 7.5 for this year. It is scheduled to announce the first-quarter economic growth figures on Thursday, May 18. —ALG, GMA News