Weakening of the peso

“Painting a grim picture about our prospects is not our intention in detailing the impact of the peso’s weakening”

Almost always, contradicting reactions are expressed every time the peso weakens against the mighty US dollar with overseas Filipino workers (OFW) who earn in dollars welcoming it to the hilt, while those working in the country, thus earning in pesos, are dreading it to high heavens.

Monetary officials announced Tuesday that the peso hit rock bottom, the weakest, they say, in 12 years at P53.23:$1. For sure, the OFW and their families in the country welcome this development. A stronger US dollar translates to more pesos they can use in purchasing goods they want.

Local earners, on the other hand, dread the dawning of this kind of development. They now would need more pesos to buy the goods they need.

But objectively looking at the weakening of the peso, both are actually losers. A weak peso triggers inflation, an economic condition where a purchaser at present would need more money to buy the goods he had previously bought at a lower price.

The layman’s question in such a situation is whether this unwanted condition can be prevented?

Theoretically, even the government cannot totally prevent this from happening. What monetary managers can do is simply mitigate its impact on the economy and the consumers. This is what the country’s monetary managers are out to do when they meet next week.

However, mitigating its impact is the biggest challenge because the Philippine economy is so tied up, to the local economy’s comfort, to the US economy. That the local economy is so dependent on the US economy is proved by the adage that when the US economy coughs, the Philippine economy gets afflicted with tuberculosis.

Tuesday’s weakening of the peso is triggered by the US Treasury’s move to increase its interest rates. This development was enough to cause fund managers to shift their attention from the local currency to the US currency. In other words, overnight the US dollar became the darling with the peso the spurned currency.

This development may not sound interesting much more alarming especially to the uninitiated about the nitty gritty of currency movements. In reality, however, today’s life is very much glued to the currency’s ups and downs. The story of modern day life revolves around it.

With the weakening of the peso we should now prepare ourselves for the worsening of the current economic condition. Procurement of raw materials, to cite an example, that are being churned out into goods by local factories sourced from abroad will now be costlier than it used to be before the peso’s plunge.

This will have bearing on the local industry’s production capacity. Will a costly foreign-sourced raw material slow down local production? Surely it will. A lower production capacity translates to lower productivity that’ll either push local manufacturing to the sidelines or force them to close shop.

Painting a grim picture about our prospects is not our intention in detailing the impact of the peso’s weakening but rather narrate it in a way easily understood by the layman. The intention is to open the eyes of as many economically uninitiated Filipinos to prepare them for this looming scenario.

Since the implementation of the TRAIN law last January, morning and evening news on television and radio including the daily newspapers are flooded with reports depicting a grim situation not understood by many. This is not good because it’ll just leave the uninitiated to speculate.

A country can’t survive with mere speculations. In this regard, media and the academe can be of great help. Understandably, the government will do its best to deflect the true impact of any development such as this fearing it’ll be accused of failing the populace.

Until now the people are waiting for an honest to goodness assessment by the government of the true impact of the TRAIN law on their life. Sadly, government is not communicating an enlightening message that is assuring to the restless populace.

Will mainstream media pick it up from where the government failed? As mentioned, we can’t afford to allow the people to just speculate what is happening and what the government is doing to alleviate them from the economic burden they have been thrust into. (jelbacon@yahoo.com; jelbaconii@gmail.com)