Ponciano Intal, an economist from De La Salle University, said the government must be "aggressive in providing support for firms to adjust better to an appreciating currency."
At the sidelines of yesterday’s annual meeting of the Philippine Economic Society, Intal said there must be access to credit capital goods which can be used for upgrading operations.
However, this is not currently available. This, coupled with a stronger peso spell bad news for exporters.
"You can have a bit of a hallowing out if these (insufficient support and peso appreciation) things continue more aggressively," he explained.
Ideally, the peso gaining strength against the dollar should not have an adverse effect in the export business, Intal said. "If it is anticipated and the firms have prepared for it, there’s no problem with P40 or P45 (exchange rate). The real issue is if it is totally unanticipated and they have not prepared for it."
He said to counter the exchange rate, the productivity rate must increase and investments must be made in machineries and equipment.
Unfortunately, Intal said the exporters did not prepare for the currency appreciation.
"They (exporters) are now in a very fragile situation. When you have that you have to be careful with your exchange rate. It can kill them (exporters), at least the more marginal ones," he explained.
When asked if the government should manage the exchange rate, Intal said the central bank can do this. "I think to some extent there is merit in managing somewhat to give exporters the time for adjusting," Intal noted.