‘Peso slide has limited impact on Philippine economy’

MANILA, Philippines -  The Bangko Sentral ng Pilipinas (BSP) yesterday allayed fears over the effect of the peso’s depreciation, saying this would have “limited impact” on the economy.

BSP Governor Nestor Espenilla told the Senate finance committee during the briefing of the Development Budget Coordinating Council that “the peso is expected to remain broadly stable over the medium-term.”

“It is also worth noting that the recent decline in the peso should have minimal effects on the country’s macroeconomic conditions,” Espenilla said. 

“For instance, it takes a permanent one peso per dollar depreciation to raise inflation by about 0.15 to 0.2 percentage point over a two-year period. This limited impact gives the BSP the flexibility to take a longer view on the peso,” he said.

The peso continued to weaken on Tuesday, slipping closer to an 11-year low at P51.38 to a dollar.

During the briefing, Socioeconomic Planning Secretary Ernesto Pernia said the Philippines is also expected to remain one of the fastest growing economies in Asia.

Pernia noted that growth would still be driven by domestic consumption, government spending, exports, construction and infrastructure development, manufacturing and tourism.

As far as risks and uncertainties are concerned, Pernia said that the slower than expected growth in the United States and United Kingdom could have an impact on the Philippine economy, as well as the tightening in global financial conditions, geopolitical tensions and trans-boundary diseases.

On the local front, Pernia said that increased intensity of natural hazards, delays in infrastructure and reconstruction projects, logistics bottlenecks, growing number of Filipinos of reproductive age and “political noise” pose downside risks to growth.

But Senate Minority Leader Franklin Drilon and Sen. Loren Legarda took exception to the assessment made by Pernia that political noise is among the risks to growth faced by the country.

Responding to Pernia’s statement, Drilon asked him what he meant by political noise and if this included criticisms against the Duterte administration.

Pernia said that it is a general expression and may come from any sector of society, not just the political opposition such as the Liberal Party, of which Drilon is the vice chairman.

Pernia said that criticisms of the Duterte administration could lead to disunity and consequently pose a risk to economic growth.

Drilon rebutted Pernia and told him to be careful with his language.