Domingo downplays effects of rising peso on export sector

MANILA, Philippines - Exporters should not worry so much that the peso is getting stronger against the dollar because since almost all other currencies have appreciated, the Philippines did not lose its competitiveness in the US market, Trade and Industry Secretary Gregory L. Domingo said.

“The peso appreciated. It doesn’t mean that our exports would weaken,” Domingo said in an interview. “The peso appreciated but so did most countries. Everyone would eventually raise their prices in the US so the US will not have a choice. They would have to pay more in terms of dollars.”

“Remember a big part of the strengthening of the peso was caused by weakness of the dollar not because the peso has become really strong. The Thai baht appreciated more than the peso, Australian New Zealand dollar and the yen appreciated more. In fact we are more competitive than those countries because we are cheaper,” Domingo explained further.

The secretary explained that it would have been bad for Filipino exporters if only the peso appreciated because the US can opt to buy from other countries which did not gain strength against the greenback. But because all other countries experienced the same thing, Domingo said the US has no choice but to pay higher prices.

Domingo stressed that nobody can say that just because the peso appreciated against the dollar our exporters will be less competitive. “You have to look at what happened to the other countries supplying also to the US and almost all appreciated against the US,” he explained.

Domingo conceded that the US credit downgrade will most likely lead to the further depreciation of the dollar.

On the upside, Domingo said that because the Japanese yen has grown and the peso depreciated against it, the Philippines became more competitive in terms of Japanese exports.

With regards to oil prices, Domingo said part of the strengthening of oil prices is because of the weakness of the dollar because a big part of the production of this is in the Middle East. This means that the cost in the local currency there so when it is translated to the dollar it becomes more expensive even if there is no contraction in the supply.

With regards to the remittances, Domingo said only those being paid in the US dollar will be affected but he stressed that the gross domestic product (GDP) of our country will not be affected even if we have a consumption driven economy fueled by remittances.

Meanwhile, the Philippine Exporters Confederation Inc. (Philexport) has expressed concerns over the peso-dollar exchange rate and has asked the government for some assistance. Philexport through its president Sergio Ortiz Luis has asked the government to strongly endorse or release an EO on the expansion of VAT exemption of raw materials to other export inputs such as rentals and supplies.