SCUTTLEBUTT

The flood control controversy had weakened the peso, which retreated to the 58-level on 25 September.

All is not lost, however, as the Philippine peso breaching the P60 per US dollar level should be beneficial to exporters, according to an economist.

Professor Dr. Ronilo Balbieran of the University of Asia and the Pacific said the so-called “exchange rate pass-through” –that every 10 percent increase in exchange rate or depreciation will be passed-on to inflation– has declined.

Balbieran said that apparently, foreign exchange appreciation results in higher imported raw materials, and it will be passed on to the price of the final product.

“In the olden days, when we did not have OFWs (overseas Filipino workers), BPOs (business process outsourcing), tourism, it may be true. But now, the exchange rate pass-through has actually gone down,” he said.

Balbieran said the correlation of foreign exchange depreciation and inflation is no longer true, citing some neighboring countries that have all depreciated their currencies to help their exporters.

He added beliefs that the strong peso is a strong economy is “further from the truth”.